Dhein v. Frankenmuth Mut. Ins. Co.
| Decision Date | 23 September 2020 |
| Docket Number | Appeal No. 2019AP531 |
| Parties | Scott DHEIN, Plaintiff, v. FRANKENMUTH MUTUAL INSURANCE COMPANY and City Centre, LLC, Defendants-Third-Party Plaintiffs-Appellants, Beamaco, LLC, Sentry Insurance, a Mutual Company and Liberty Mutual Insurance Company, Defendants, v. ACE American Insurance Company, Third-Party Defendant-Respondent. |
| Court | Wisconsin Court of Appeals |
On behalf of the defendants-third-party plaintiffs-appellants, the cause was submitted on the briefs of Erik J. Pless and Brian D. Anderson of Everson, Whitney, Everson & Brehm, S.C., Green Bay.
On behalf of the third-party defendant-respondent, the cause was submitted on the brief of Jacob A. Sosnay of Bascom, Budush & Ceman, S.C., Germantown.
Before Neubauer, C.J., Reilly, P.J., and Davis, J.
¶1 City Centre, LLC (City Centre) and Frankenmuth Mutual Insurance Company1 appeal from the summary judgment dismissal of City Centre's claim for coverage against ACE American Insurance Company (ACE). ACE is the comprehensive general liability (CGL) carrier for Broadwind, Inc., d/b/a Tower Tech Systems (Broadwind), one of City Centre's commercial tenants. City Centre is an additional insured on the ACE policy pursuant to its lease with Broadwind. The lease provided contractual indemnification, requiring Broadwind to hold City Centre harmless for any injury caused in whole or in part by Broadwind's negligence. City Centre was sued by Scott Dhein, an employee of Broadwind, following an accident on September 9, 2013. The accident occurred on property owned by City Centre but used by Broadwind on a daily basis in the course of its business. City Centre tendered coverage to ACE. ACE refused to provide a defense or coverage to City Centre.
¶2 The circuit court granted summary judgment to ACE on the grounds that any coverage under the ACE policy was excluded as Dhein's accident did not occur on premises rented by Broadwind and no evidence existed that Broadwind was causally negligent for Dhein's injuries. City Centre argues that the court erred in granting summary judgment as coverage exists under both the "additional insured" and "insured contract" provisions of the ACE policy and a genuine issue of material fact exists as to Broadwind's causal negligence.
¶3 We conclude that the additional insured endorsement provides coverage to City Centre for liability incurred for bodily injury caused by Broadwind's "acts or omissions," regardless of whether Broadwind is legally negligent. Even in the absence of our first conclusion, a genuine issue of material fact would exist as to Broadwind's causal negligence so as to trigger coverage for any resulting liability under the additional insured endorsement to the extent, upon further appeal, negligence is deemed a required element for coverage under the endorsement. Moreover, Broadwind has coverage under the same policy for certain contractual indemnification obligations it may owe to City Centre as a result of Broadwind's negligence. We also conclude, however, that City Centre cannot invoke the direct action statute to enforce Broadwind's rights to that coverage as the direct action statute only permits an action against a liability insurer to recover insurance proceeds attributable to a negligence action, and, in this case, Broadwind's underlying liability to City Centre can only result from contractual indemnity.
¶4 We recite the pertinent facts, address negligence and insurance law in Wisconsin, and analyze the additional insured and insured contract provisions of the ACE policy and how they apply in this case.
¶5 City Centre owns a large tract of industrial land referred to as the "peninsula" in the City of Manitowoc and leases parcels within the peninsula to various tenants. Broadwind, a wind turbine company, leased three separate parcels of land on the peninsula from City Centre. Land between the various tenants was available for use by the tenants and is described as "common areas" in Broadwind's lease. The "common areas" are owned by City Centre, and City Centre is required to maintain and repair the "common areas."
¶6 Dhein was operating a snorkel lift on September 9, 2013, when a tire of the snorkel lift fell into a drainage basin whose grate had become dislodged. The drainage basin is located in the parking lot, which is adjacent to and between buildings leased by Broadwind and another tenant. The parking lot is "common area" land that Broadwind employees used on a daily basis to move tower sections between their parcels via large forklifts and machines. Broadwind admitted that their employees’ use of large forklifts and heavy equipment to move tower sections would occasionally dislodge the grate covering the drainage basin and that snowplowing would also dislodge the grate "just about every time they plowed snow until there was a good base."2 A maintenance manager for Broadwind testified that the grate was dislodged on a number of occasions prior to Dhein's accident and that he or others would replace the grate. The maintenance manager described the drainage basin area as Broadwind never notified City Centre that the grate was being dislodged—or that it was defective—and never asked City Centre to fix the defective grate.
¶7 The lease between City Centre and Broadwind required Broadwind to carry a CGL policy with City Centre as an "Additional Named Insured," insuring both Broadwind and City Centre "against injury to ... person ... arising out of the use and occupancy of the Premises." Broadwind was also required by the lease to "protect[,] indemnify, save, and keep harmless" City Centre "from any and all claims arising out of or from any accidents or other occurrences on or about the Premises causing injury ... due directly or indirectly to negligent use of the Premises" by Broadwind or its employees. (Emphasis added.)
¶8 ACE issued the required CGL policy to Broadwind (the ACE policy), which provided coverage to additional insureds. The ACE policy provided, in relevant part:
Pursuant to the policy language, the coverage for an additional insured extended only to liability for injuries "caused, in whole or in part, by [Broadwind's] acts or omissions" or those acting on behalf of Broadwind. Coverage was further limited to "acts or omissions" that Broadwind or its actors undertook "[i]n the performance" of its "ongoing operations" or "[i]n connection with" "premises owned by or rented" by Broadwind.
¶9 The ACE policy contained standard CGL language indemnifying Broadwind for any liability it might incur for "bodily injury" caused by an "occurrence." It also included a standard contractually-assumed liability exclusion which reads as follows:
The ACE policy defines "insured contract" as "[a] contract for a lease of premises" or that "part of any other contract or agreement pertaining to your business ... under which you assume the tort liability of another party to pay for ‘bodily injury’ or ‘property damage’ to a third person or organization."
¶10 Dhein filed a personal injury lawsuit against City Centre, Beamaco, LLC,3 and their respective insurers, alleging negligence and safe place violations. After initial discovery, City Centre filed a Third-Party Summons and Complaint against ACE, alleging that ACE was liable to City Centre as an additional insured and under the insured contract exception to the contractually-assumed liability exclusion referenced above, that ACE was liable for any negligence of Broadwind employees related to Dhein's injury, and that ACE owed it a duty of defense.
¶11 As relevant to this appeal, ACE moved for declaratory and summary judgment, arguing that City Centre did not have coverage. The circuit court granted summary judgment to ACE on the grounds that any coverage that did exist was excluded as Dhein's accident did not occur on premises rented by Broadwind and no evidence existed that Broadwind was causally negligent for Dhein's injuries. The circuit court found that City Centre had constructive notice of the defective grate given the length of time the grate was being dislodged. City Centre appeals.
¶12 At issue in this case is whether City Centre and Broadwind have coverage under the ACE policy. Interpretation of an insurance contract is a question of law that we review de novo. American Family Mut. Ins. Co. v. American Girl, Inc. , 2004 WI 2, ¶23, 268 Wis. 2d 16, 673 N.W.2d 65. In reviewing the ACE policy, we are guided by the familiar principles that insurance policies are construed as they would be understood by a reasonable person in the position of the insured, and that any ambiguities are construed in favor of coverage, and against the insurer who drafted the...
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