Lease America Corp. v. Insurance Co. of North America

• Citation: 276 N.W.2d 767,88 Wis.2d 395
• Decision Date: 27 March 1979
• Docket Number: No. 76-323,76-323
• Parties: LEASE AMERICA CORPORATION, an Iowa Corporation, Plaintiff-Respondent, v. INSURANCE COMPANY OF NORTH AMERICA, a Foreign Corporation, Defendant-Appellant.
• Court: Wisconsin Supreme Court

Page 767

276 N.W.2d 767

88 Wis.2d 395

LEASE AMERICA CORPORATION, an Iowa Corporation, Plaintiff-Respondent, v. INSURANCE COMPANY OF NORTH AMERICA, a Foreign Corporation,

Defendant-Appellant.

No. 76-323.

Supreme Court of Wisconsin.

Submitted on Briefs Feb. 28, 1979.

Decided March 27, 1979.

Merten, Connell & Sisolak, S. C., Milwaukee, for defendant-appellant.

Arthur M. Moglowsky and Bass, Goldstein, Moglowsky & Stein, S. C., Milwaukee, for plaintiff-respondent.

ABRAHAMSON, Justice.

This is an appeal from an order of the trial court granting Lease America's motion for a new trial on the issue of liability and an order denying a motion to reconsider the granting of a new trial. We affirm the orders.

Lease America Corporation (an assignee of the lessor) leased printing machines to North Shore Publishing Company, a printing firm with its principal place of business in the Milwaukee suburb of Shorewood. The lease required that North Shore maintain at its own expense fire and extended coverage on the leased equipment with loss payable to Lease America or North Shore as their respective interests may appear.

The printing machines were destroyed by vandals in October of 1972. North Shore's insurance policy with Insurance Company of North America (INA) included coverage for vandalism. However, INA refused to pay the claim on the ground that the printing equipment was not at a "location" designated in the policy as required by the policy. Lease America asserted that the equipment was in fact at a location designated in the policy and, in the alternative, that if the policy description of the location was not sufficient, the failure was the result of a mutual mistake and that the policy should be reformed to describe correctly the location of the covered equipment.

Evidence introduced at the trial established that there was considerable confusion as to what would have been a correct designation of the "location" of the equipment because a "location" is designated in the policy by street address only and the site where the equipment was maintained had no official street address. The equipment was kept at a site close to a paper storage facility used by North Shore which was also apparently identified by the same inclusive street address. INA claimed that only the paper storage facility was covered by the policy.

On the issue of "mistake," Lease America introduced evidence that North Shore intended that all of its assets be fully covered by insurance and that North Shore relied on a local insurance agent to see that the insurance coverage was sufficient. A principal argument in favor of Lease America's contention that the insufficient address had been a mistake was that it was not reasonable business policy for North Shore to conceal assets from its insurance company thus denying itself adequate coverage.

Late in the trial INA countered Lease America's assertion of mistake by introducing testimony tending to show a motive for North Shore's concealing the location of the printing equipment. A former employee of North Shore testified that because of union objections to the use of the equipment, North Shore had taken steps to hide its photo-offset printing operation from the union, including not telling its local insurance agent about the equipment or its location (although it always included a sufficient dollar amount of coverage for the equipment).

Lease America objected to the introduction of the former employee's testimony, arguing that it was not relevant, as INA was not defending on the ground of misrepresentation, and that, because INA had not alleged misrepresentation, Lease America was unfairly surprised. The trial court admitted the testimony, ruling that the evidence was relevant on the issue of North Shore's claim of mistake as to the designation of the location of the equipment in the policy.

On cross examination of the former employee, Lease America elicited testimony that the existence of the photo-offset printing operation had become generally known by the time the new insurance policy became effective. This testimony tended, to some extent, to suggest that North Shore no longer had a reason to conceal the equipment location. However, Lease America produced no rebuttal witness, a failure specifically pointed out by INA in its closing argument.

The jury returned a verdict in favor of INA. In answering the special verdict questions the jury found that the address given as the covered "location" did not sufficiently describe the location of the printing equipment and that there had been no mistake. Damage to the equipment was assessed by the jury at $16,375.

The trial court granted Lease America's motion for a new trial on the issue of liability under sec. 805.15, Stats., which provides in part:

"(1) MOTION. A party may move to set aside a verdict and for a new trial because of errors in the trial, or because the verdict is contrary to law or to the weight of evidence, or because of excessive or inadequate damages, or because of newly-discovered evidence, or in the interest of justice. Orders granting a new trial on grounds other than in the interest of justice, need not include a finding that granting a new trial is also in the interest of justice.

"(2) ORDER. Every order granting a new trial shall specify the grounds therefor. No order granting a new trial shall be valid or effective unless the reasons that prompted the court to make such order are set forth on the record, or in the order or in a written decision. In such order, the court may grant, deny or defer the awarding of costs."

The trial court granted the motion on the basis of error in the trial and in the interest of justice. The trial court determined that it erred in admitting the former...