Leverence v. U.S. Fidelity & Guar., 89-1646

• Decision Date: 05 September 1990
• Docket Number: No. 89-1646,89-1646
• Citation: 462 N.W.2d 218,158 Wis.2d 64
• Parties: Betty LEVERENCE, Thomas Leverence, Ellen Schneider, Eugene Schneider, David Sleight, et al., Plaintiffs-Petitioners-Appellants-Cross Respondents, v. UNITED STATES FIDELITY & GUARANTY, a foreign corporation, National Surety Corporation, a foreign corporation, Home Insurance Company, a foreign corporation, Chicago Insurance Company, a foreign corporation, The Fidelity and Casualty Insurance Company of New York, a foreign corporation, The Aetna Casualty and Surety Company, a foreign corporation, Interstate Fire and Casualty Company, a foreign corporation, Firemans Fund Insurance Company, a Wisconsin corporation, and First State Insurance Company, a foreign corporation, Defendants-Respondents-Cross Appellants, Employers Insurance of Wausau, a mutual company, a Wisconsin corporation, and Product Fabrication Service, Defendants-Respondents, Edward Alvey, Sr., Defendant-Co-Appellant-Cross Appellant-Cross Respondent, Thilmany Pulp & Paper Co., Paper Corporation of America, a Wisconsin corporation, d/b/a Universal Paper Corporation, Defendants, Donald Mears, Defendant-Petitioner-Co-Appellant-Cross Appellant. d
• Court: Wisconsin Court of Appeals

Page 218

462 N.W.2d 218

158 Wis.2d 64

Betty LEVERENCE, Thomas Leverence, Ellen Schneider, Eugene

Schneider, David Sleight, et al., Plaintiffs-Petitioners-Appellants-Cross Respondents, v. UNITED STATES FIDELITY & GUARANTY, a foreign corporation,

National Surety Corporation, a foreign corporation, Home

Insurance Company, a foreign corporation, Chicago Insurance

Company, a foreign corporation, The Fidelity and Casualty

Insurance Company of New York, a foreign corporation, The

Aetna Casualty and Surety Company, a foreign corporation,

Interstate Fire and Casualty Company, a foreign corporation,

Firemans Fund Insurance Company, a Wisconsin corporation,

and First State Insurance Company, a foreign corporation,

Defendants-Respondents-Cross Appellants,

Employers Insurance of Wausau, a mutual company, a Wisconsin

corporation, and Product Fabrication Service,

Defendants-Respondents,

Edward Alvey, Sr., Defendant-Co-Appellant-Cross

Appellant-Cross Respondent,

Thilmany Pulp & Paper Co., Paper Corporation of America, a

Wisconsin corporation, d/b/a Universal Paper

Corporation, Defendants,

Donald Mears, Defendant-Petitioner-Co-Appellant-Cross

Appellant. ^d

No. 89-1646.

Court of Appeals of Wisconsin.

Submitted on Briefs May 5, 1990.

Opinion Released Sept. 5, 1990.

Opinion Filed Sept. 5, 1990.

James A. Olson, Steven J. Schooler, Marsha M. Mansfield of Lawton & Cates, S.C., Madison, and Jerold Oshinsky and Nancy A. Markowitz of Anderson, Kill & Oshinsky, Washington, D.C., for plaintiffs-petitioners-appellants-cross respondents, Betty Leverence, et al.

Gerald M. O'Brien of Anderson, Shannon, O'Brien, Rice & Bertz, Stevens Point, for defendant-petitioner-co-appellant-cross appellant, Donald Mears.

Michael J. Stingl and Michael L. Eckert of Eckert Law Office, Rhinelander, for defendant-co-appellant-cross appellant-cross respondent, Edward Alvey, Sr.

Dennis K. Sage of Otjen, Van Ert, Stangle, Lieb & Weir, S.C., Milwaukee, for defendant-respondent-cross appellant, First State Ins. Co.

Barrett J. Corneille of Bell, Metzner, Gierhart & Moore, S.C., Madison, for defendants-respondents-cross appellants, Chicago Ins. Co. and Interstate Fire and Cas. Co.

Scott W. Clark of Clark & Clark, Ashland, for defendant-respondent-cross appellant, U.S. Fidelity and Guar.

Joanne Swieciak Mack and Bruce D. Huibregtse of Stafford, Rosenbaum, Rieser & Hansen, Madison, for defendant-respondent-cross appellant, The Fidelity and Cas. Ins. Co. of New York.

Rhea A. Myers of Stroud, Stroud, Willink, Thompson & Howard, Madison, for defendant-respondent, Product Fabrication Service (PFS).

Barbara R. Hatch of Murnane, Conlin, White, Brandt and Hoffman, St. Paul, Minn., for defendant-respondent-cross appellant, The Aetna Cas. and Sur. Co.

Keith F. Ellison and Peter L. Hessert of Patterson, Richards & Hessert, Wausau, for defendant-respondent-cross appellant, Home Ins. Co.

David A. Piehler and Jeffrey J. Strande of Terwilliger, Wakeen, Piehler & Conway, Wausau, and Donald A. Vogelsang and David E. Schoenfeld of Grippo & Elden, Chicago, Ill., for defendants-respondents-cross appellants, Firemans Fund Ins. Co. and Nat. Sur. Corp.

Before CANE, P.J., and LaROCQUE and MYSE, JJ.

CANE, Presiding Judge.

Occupants of homes built by Tri-State Homes, Inc., appeal a summary judgment dismissing their claims for negligence and strict liability against Tri-State's insurers and an inspection service, Production Fabrication Service (PFS). The trial court held that the insurers were entitled to summary judgment because Tri-State had failed to provide timely notice of an occurrence as required by the policies. The trial court also ruled that the inspection agency had no duty to the occupants independent of its contractual obligations to Tri-State, and that the occupants failed to demonstrate any breach of these contractual obligations. Although these two rulings disposed of the entire claim, the trial court went on to rule on other policy defenses raised by the insurance companies in the event that its decision were overturned on appeal. Therefore, several additional rulings are also challenged by the occupants and the insurers on cross-appeal.

The occupants raise eight issues on appeal. We conclude that material issues of fact exist with regard to the notice of occurrence issue, as well as other issues. Accordingly, the summary judgment is reversed in part. We agree with the trial court's rulings that are challenged on cross-appeal, and therefore affirm the judgment with respect to these issues. Therefore, the judgment is affirmed in part, reversed in part and the cause is remanded for further proceedings consistent with this opinion.

Tri-State manufactured prefabricated homes during the 1970s and the 1980s and marketed them in northern Wisconsin, Minnesota and Michigan's upper peninsula. Donald Mears was president, and Edward Alvey, Sr., was vice-president until 1978 when Mears sold out. Alvey then served as president until the business was liquidated in bankruptcy in 1987.

This action, brought by 798 occupants of 222 Tri-State homes, is premised on strict liability and negligence theories. The defendants on appeal consist of insurance companies and a private inspection agency, PFS. The occupants seek damages from the insurance companies and PFS for their bodily injuries and for the cost of repairs required due to their bodily injuries or illnesses.

The occupants allege that their homes retain excessive moisture within their exterior walls. This moisture allegedly promotes mold, mildew, fungus, spores and other toxins that are a continuing health risk and adversely affect the value of the units. The occupants allege that the excessive moisture resulted from the defective design of the walls and roofs, inappropriately selected building materials and faulty construction practices. Specifically, the occupants object to the use of Thilco paper, a vapor barrier, which was used on the exterior walls.

Tri-State's insurers provided comprehensive general liability insurance coverage to Tri-State between 1970 and 1986. ¹

I. STANDARD OF REVIEW

A number of issues require the interpretation of insurance policies.

Interpretation of an insurance contract involves a question of law. An appellate court decides questions of law independently without deference to the decision of the trial court. When construing an insurance contract, an objective test is applied. The objective test requires that the policy be construed as it would be understood by a reasonable person in the position of the insured.

St. John's Home v. Continental Cas. Co., 147 Wis.2d 764, 781, 434 N.W.2d 112, 119 (Ct.App.1988) (footnotes omitted). Where the terms of a policy are not ambiguous, a court will simply apply those terms rather than engage in construction. See Paape v. Northern Assur. Co., 142 Wis.2d 45, 51, 416 N.W.2d 665, 668 (Ct.App.1987).

When reviewing a grant of summary judgment, we apply the same methodology as the trial court. The moving party has the burden to establish the absence of a factual dispute and that he is entitled to judgment as a matter of law. Grams v. Boss, 97 Wis.2d 332, 338-39, 294 N.W.2d 473, 476-77 (1980). A moving defendant accomplishes this by presenting a defense to defeat plaintiff's complaint. If there is a dispute as to material facts or if different inferences might be drawn from the facts, summary judgment is unavailable. Id.

II. ISSUES RAISED ON APPEAL

A. Tri-State's Duty to Give Notice of an Occurrence Under the Policies

The occupants first challenge the trial court's ruling that policy language required Tri-State to give its insurers notice of an occurrence in 1979, and, because it failed to do so, no coverage was available. Because the record fails to demonstrate, as a matter of law, when Tri-State became aware of bodily injuries caused by excessive moisture, we conclude that material issues of fact exist as to when Tri-State's duty to give notice arose.

The policies require that notice of an occurrence be given as soon as practicable. ² The notice provisions state in part:

NOTICE OF OCCURRENCE: Whenever the insured has information from which the insured may reasonably conclude that an occurrence covered hereunder involved injuries or damage which, in the event that the insured should be held liable, is likely to involve this policy, notice shall be given ... as soon as practicable....

The term "OCCURRENCE" is defined as:

[A]n accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury, property damage ... during the policy period. ³

The insurers contend that their first notice of any occurrence was upon receipt of the summonses served between February and October 1988. The insurers argue that Tri-State was required to give notice of an occurrence at the time it first learned of property damage.

It is undisputed that Tri-State had notice of the excessive moisture problem and accompanying property damage as early as 1976. For example, in a letter dated March 11, 1976, addressed to Tri-State from attorney Roger Gette, an attorney for an owner of a Tri-State home, Gette discussed, among other complaints, problems associated with "inadequate venting and excessive interior humidity conditions." He also wrote that water stains existed on ceilings throughout the house and that doors were warped. This letter was sufficient to alert Tri-State that property damage was resulting from the excessive humidity. The letter also mentions "physical discomfort," but does not allege whether the physical discomfort was caused by the excessive moisture or was the result of several other complaints with the house.

The policies do not require Tri-State to give notice of an occurrence unless the occurrence was covered under the policy. An insured has no duty to give an insurer notice of an uninsured occurrence. Kolbeck v. Rural Mut. Ins. Co., 70 Wis.2d 655, 661, 235 N.W.2d 466,...