Lakeside Plywood & Bldg. Materials, Inc. v. Aetna Cas. & Sur. Co.
| Decision Date | 15 March 1977 |
| Docket Number | No. 75--263,75--263 |
| Citation | 75 Wis.2d 484,250 N.W.2d 1 |
| Parties | LAKESIDE PLYWOOD AND BUILDING MATERIALS, INC., a Domestic Corporation, Respondent, v. AETNA CASUALTY AND SURETY COMPANY, a Foreign Insurance Corporation, Appellant, |
| Court | Wisconsin Supreme Court |
Kenneth M. Kenney and Wolfe, O'Leary, Kenney & Wolfe, Milwaukee, for appellant.
Griffin G. Dorschel and Axley, Brynelson, Herrick & Gehl, Madison, for respondent.
Two issues are raised on appeal:
1. What is the maximum limit of liability under the policy?
2. Does this policy violate sec. 203.22, Stats., or is it void as contrary to public policy because it exacts a premium based on property values in excess of the maximum limit of coverage?
The first issue involves a problem solely of insurance contract interpretation. The rules of construction of insurance contracts have been summarized in Garriguenc v. Love, 67 Wis.2d 130, 134--35, 226 N.W.2d 414, 417 (1975):
(footnotes omitted).
The trial judge concluded that the contract here was at least ambiguous as to the insurer's limit of liability and thus adopted the insured's proffered construction. We find no ambiguity. It is possible to ascertain the intent of the parties by construing the contract as to what a reasonable person in the position of the insured would have understood the words to mean.
The fact sheet of the insurance policy in question states in paragraph 5:
'Insurance is provided with respect to those premises described above and with respect to those coverages and kinds of property for which a specific limit of liability is shown, subject to all of the terms of this policy including forms and endorsements made a part hereof.' (emphasis added).
Directly below this paragraph is a section entitled 'Section 1--Property Coverage.' Within this section is a column entitled 'Limit of Liability' under which the amount $15,000 is specified for personal property coverage for the location at which the fire took place, denoted Location No. 2. This $15,000 figure was increased to $90,000 by en endorsement issued about three months after the policy had become effective.
The endorsement which amends the policy to cover personal property on a reporting basis also refers to limits of liability. Under the policy states:
'Subject to the provisions with respect to the Company's percentage of the total of the limits of liability for all contributing insurance, coverage under this endorsement applies to each of the following for which a limit of liability is specified.' (emphasis added).
The emphasized dependent clause obviously applies to the word 'coverage' in the above quoted policy term. This states the coverage is subject to the applicable percentage of the total limits for all contributing insurance. The percentage spoken of in this paragraph is specified on the face sheet of the policy to be 100 percent for the location of the fire, Location No. 2. This indicates it was intended that there be no other contributing insurance for this location. Directly below this paragraph on the reporting form endorsement is a 'Schedule of Limits of Liability,' which specifies $15,000 later increased to $90,000, as the 'limit of liability,' for all contributing insurance for Location No. 2.
Another obvious reference to the limits of liability is contained in the provisional amount clause on the reporting endorsement. That clause states:
(emphasis added).
This clearly states the coverage under the policy is subject to the Limits of Liability for all Contributing Insurance. These limits, as pointed out above, are identified on the same reporting endorsement, directly above the provisional amount clause.
Aetna argues that this $90,000 limit is the maximum liability of the company under its policy. Lakeside, on the other hand, contends, and the trial judge agreed, that this limit is only provisional and that the limit of coverage is the actual cash value of the loss, however large, minus certain penalties, if any, for underreporting monthly values at the location.
We are of the opinion that the above statements of 'limits of liability' could only be construed by a reasonable person in the position of the insured as exactly what they are entitled--limits of liability under the contract.
Lakeside's characterization of the $90,000 limit as provisional evidently arises from the provisional amount clause, quoted above on the reporting endorsement. The first portion of that clause states, 'The amount of insurance provided for hereunder is provisional and is the amount on which the provisional premium is based. . . .' We fail to see that the use of the term 'provisional' applies to the limits of liability. We think this language refers to the figure stated on the same endorsement under as the 'Provisional Amount for Coverage B--Personal Property.' That figure is $236,250. That this is the correct interpretation is bolstered by the fact that the record shows the provisional premium is calculated as 75 percent of the established premium for the total amount of insurance provided. The amount of $236,250 is precisely 75 percent of $315,000, the sum of the original limits of liability for both the locations No. 1 ($300,000) and No. 2 ($15,000). Thus, the figure $236,250 is the provisional amount of coverage upon which the provisional premium is calculated and paid. Thus, although the amount of insurance provided may be termed provisional, this does not require that the stated limits of liability of the company are also provisional.
Even if the term 'provisional' is applied to the stated limits of liability under the policy, that would not prevent those limits from constituting the maximum liability of the company. In Ben-Hur Manufacturing Co. v. Firemen's Insurance Co., 18 Wis.2d 259, 118 N.W.2d 159 (1962), this court construed two reporting form fire policies virtually identical to that in this case. There the court found that the policies provided for a provisional amount of insurance and for a deposit premium of 75 percent of that provisional amount. The court stated several times that this provisional amount was the maximum amount of liability of the insurer under these policies. In that case the court termed the stated limits as the provisional amount of insurance, while in the instant case the provisional amount of insurance is 75 percent of the stated limits, the figure upon which the provisional premium is based.
The trial judge distinguished the policy in this case from those involved in the Ben-Hur case. He noted that the policies in that case contained, a specific clause relating to limits of liability. That clause stated that the liability of the company is 'in no event to exceed the . . . following limits.' Both the trial judge and Lakeside state that the policy in this case does not contain language as direct as that in the Ben-Hur case. It does not necessarily follow however, that the language of the policy in question is not sufficiently plain.
The provisional amount clause, quoted above, states absolutely that
'(a)ny loss in excess of the limits stated in this policy shall be borne by the insured, notwithstanding the requirement that premium is to be adjusted on the basis of full values reported.'
The trial judge states that reliance upon the above statement as a basis that the stated limits are the absolute limits begs the question. This could be true if other limits were stated in the policy, and this statement did not make clear what limits were referred to. However, we note that in the two most critical places in this policy, on the face sheet and on the reporting endorsement, references are made to specific limits of liability, and it is stated the coverage is subject to such limits. In both places, under headings 'limits of liability,' the figure $15,000, later increased to $90,000, is stated for location No. 2. This amount must be understood to be the limit of liability stated in the policy.
The language in the policy in the Ben-Hur case is only more definitive by...
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