Marks v. Hous. Cas. Co.

Decision Date30 June 2016
Docket NumberNo. 2013AP2756.,2013AP2756.
Citation369 Wis.2d 547,881 N.W.2d 309
PartiesDavid M. MARKS, Plaintiff–Appellant–Cross–Respondent–Petitioner, v. HOUSTON CASUALTY COMPANY, Defendant–Respondent–Cross–Appellant, Bedford Underwriters, Ltd., Defendant–Respondent.
CourtWisconsin Supreme Court

For the plaintiff-appellant-cross-respondent-petitioner, there were briefs by Jon E. Fredrickson, Brian T. Fahl, Aaron H. Aizenberg, Stuart J. Check, and Kravit, Hovel & Krawczyk, S.C., Milwaukee, and oral argument by Jon E. Fredrickson.

For the defendant-respondent-cross-appellant, there was a brief by John D. Finerty, Adam E. Witkov, and Michael Best & Friedrich LLP, Milwaukee and Aidan M. McCormack, Robert C. Santoro, and DLA Piper LLC (US), New York. Oral argument by Aidan M. McCormack.

There was an amicus curiae brief by James A. Friedman, Todd G. Smith, Linda S. Schmidt, and Godfrey & Kahn, S.C., Madison on behalf of Wisconsin Insurance Alliance and American Insurance Association. Oral argument by James A. Friedman.

ANNETTE KINGSLAND ZIEGLER, J.

¶ 1 This is a review of a published decision of the court of appeals, Marks v. Houston Casualty Co., 2015 WI App 44, 363 Wis.2d 505, 866 N.W.2d 393, which affirmed the Milwaukee County circuit court's1 grant of summary judgment in favor of Houston Casualty Company (“Houston Casualty”) and Bedford Underwriters, Ltd.2 ¶ 2 In July of 2009, trustee David Marks (Marks) asked his professional liability insurer, Houston Casualty, to defend him in six lawsuits filed in 2007, 2008, and 2009 in five different states. Houston Casualty informed Marks that it had no duty to defend him in any of those lawsuits, and Marks then brought suit against Houston Casualty. Both the circuit court and the court of appeals agreed with Houston Casualty that a comparison of Marks' policy to the allegations in the complaints against Marks established that Houston Casualty had no duty to defend Marks.

¶ 3 We conclude that the complaints and counterclaim against Marks do not allege facts which, if proven, would constitute claims covered under the insurance policy Marks obtained from Houston Casualty. Houston Casualty therefore did not breach its duty to defend Marks when it declined to defend him in the six lawsuits at issue. Consequently, we affirm the decision of the court of appeals.

I. FACTUAL AND PROCEDURAL BACKGROUND

¶ 4 David Marks is the trustee of two trusts: the Irrevocable Children's Trust (“ICT”) and the Irrevocable Children's Trust No. 2 (“ICT2”). At all times relevant to this dispute, ICT and ICT2 owned a controlling interest in a company known as Titan Global Holdings, Inc. (“Titan”).3 From 2007 to 2009, a number of lawsuits involving Marks and Titan were filed throughout the country. Because the outcome of this case turns on the allegations contained in the five complaints and one set of counterclaims filed against Marks, we will set forth the contents of these documents in some detail.

¶ 5 On or about December 21, 2007, Oblio Telecom, Inc. (“Oblio”) filed a lawsuit against Hawaii Global Exchange, Inc. (“Hawaii Global”) in the United States District Court for the Northern District of Texas (the “Hawaii Global action”).4 On April 7, 2008, Hawaii Global filed a counterclaim against Oblio, Titan, Frank Crivello (“Crivello”), Marks, Bryan Chance (Chance), and Kurt Jensen (“Jensen”). The counterclaim described Marks as a “citizen of the State of Wisconsin and “a principal shareholder and equitable owner of Titan” and asserted one count of conspiracy to commit fraud against the counterclaim defendants.5 On October 24, 2008, Hawaii Global filed amended counterclaims against Titan, Oblio, Marks, Chance, and Jensen.6

¶ 6 On October 28, 2008, the Professional Liability Errors & Omissions Insurance Policy at issue in this case (“the policy” or “Marks' policy”), issued by Houston Casualty to Marks, took effect. The policy's expiration date was October 28, 2009. The policy provided coverage for

any Loss and Claim Expenses in excess of the Deductible amount and subject to the Limit of Liability as the Insured acting in the profession described in Item 3 of the Declarations shall become legally obligated to pay for Claim or Claims first made against the Insured during the Policy Period by reason of any Wrongful Act by an Insured provided always that the Insured has no knowledge of such Wrongful Act prior to the Inception Date of this Policy and further provided that such Wrongful Act took place subsequent to the Retroactive Date set forth in Item 8 of the Declarations.

¶ 7 “Loss” is defined in the policy to mean, in part, “a monetary judgment, award or settlement for damages including an award by a court of reasonable attorney's fees and costs to a party making [a] Claim.” “Claim” is defined in the policy to mean “a demand received by the Insured for compensation of damages, including the service of suit ... against the Insured.” “Claim Expenses” is defined in the policy to mean, in part:

(1) fees charged by an attorney designated by the Company and (2) all other fees, costs or expenses incurred in the investigation, adjustment, defense and appeal of a Claim if incurred by the Company or an attorney designated by the Company, or by the Insureds with the written consent of the Company.

Wrongful Act is defined in the policy to mean “any actual or alleged error or omission or breach of duty committed or alleged to have been committed or for failure to render such professional services as are customarily rendered in the profession of the Insured as stated in Item 3 of the Declarations.”

¶ 8 “Item 3 of the Declarations” lists Marks' profession as follows: [s]olely in the performance of services as the Trustee of the Irrevocable Children's Trust (ICT), and/or Irrevocable Children's Trust No. 2 (ICT2), for a fee.” Relevant to this appeal, the policy contained the following exclusions:

This Policy does not apply either directly or indirectly to any Claim and Claim Expenses:
a) Based upon or arising out of any dishonest, criminal, fraudulent, malicious or intentional Wrongful Acts, errors or omissions committed by or at the direction of the Insured.
b) For liability arising out of the Insured's services and/or capacity as:
1) an officer, director, partner, trustee, or employee of a business enterprise not named in the Declarations or a charitable organization or pension, welfare, profit sharing, mutual or investment fund or trust; ....

¶ 9 Finally, Endorsement Number 10 of the policy reads in part as follows:

c) Defense, Investigation, and Settlement of Claim 1) With respect to the insurance afforded by this Policy, the Company shall have the right and duty to defend any Claim brought against the Insured alleging a covered Wrongful Act.

¶ 10 On December 23, 2008, ILDN West, LLC (“ILDN”) filed a lawsuit against Titan, Oblio, Titan Communications, Inc. (“Titan Communications”), Planet Direct, Inc. (“Planet Direct”), Marks, Crivello, and Does 1–50 in the Superior Court of the State of California for the County of Los Angeles (the “ILDN action”). The complaint described Marks as “an individual residing at all material times in or around Dallas, Texas,” and stated that [a]t all times relevant hereto, Marks was a Chairman of Titan and represented Oblio, Titan Communications and Planet Direct.” The complaint asserted seven causes of action: breach of contract against Titan, Titan Communications, and Planet Direct; breach of contract against Oblio, Titan Communications, and Planet Direct; breach of guaranty against Titan; fraud against Titan, Marks, and Crivello; negligent misrepresentation against Titan, Marks, and Crivello; quantum meruit/unjust enrichment against Titan, Oblio, Titan Communications, and Planet Direct; and “account stated”7 against Titan, Oblio, Titan Communications, and Planet Direct.8

¶ 11 On February 2, 2009, George L. Miller, Chapter 7 Trustee of the Estate of USA Detergents, Inc. (“USAD”), filed a lawsuit against Greystone Business Credit II, LLC. (“Greystone”), GBC Funding, L.L.C. (“GBC”), Titan, Frank Orlando (“Orlando”), Chance, R. Scott Hensell (“Hensell”), Marks, Titan PCB West, Inc., n/k/a Titan Electronics, Inc. (“Titan PCB West”), Titan PCB East, Inc., n/k/a Titan East, Inc. (“Titan PCB East”), Oblio, Titan Wireless Communications, Inc. (“Titan Wireless”), StartTalk Inc. (“StartTalk”), Pinless, Inc. (“Pinless”), Appalachian Oil Company (“Appalachian”), Appco–Ky, Inc. (“Appco”), and Crivello in the United States Bankruptcy Court for the District of Delaware (the “USAD action”). The complaint described Marks as “a citizen of Wisconsin,” “Chairman of the Board of Directors of USAD at some point after August 1, 2007,” and, [a]t all material times hereto,” “Chairman of Titan and a Member of Crivello Group[, LLC].”9

¶ 12 The complaint asserted nine counts: to avoid and recover preferential transfers pursuant to 11 U.S.C. §§ 547 and 550 against Greystone and GBC; to avoid and recover preferential transfers pursuant to 11 U.S.C. §§ 547 and 550 against Greystone, GBC, Titan, Titan PCB West, Titan PCB East, Oblio, Titan Wireless, StartTalk, Pinless, Appalachian, and Appco; disallowance of all claims pursuant to 11 U.S.C. § 502(d) against Greystone and GBC; objection to proof of claim pursuant to 11 U.S.C. § 502 against Greystone and GBC; equitable subordination pursuant to 11 U.S.C. § 510(c) against Greystone and GBC; breach of fiduciary duty against Orlando, Chance, Hensell, and Marks; aiding and abetting breach of fiduciary duty against Greystone, GBC, Titan, and Crivello; civil conspiracy against Greystone, GBC, Titan, Orlando, Chance, Hensell, Marks, and Crivello; and for an accounting against Greystone and GBC.

¶ 13 On or about May 4, 2009, Phillip L. Near filed a lawsuit against Titan, Crivello, Marks, Chance, Greystone, and Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd. (“Goldberg Kohn”) in the United States District Court for the District of Kansas (the “Near action”). The...

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