NCR Corp. v. Transp. Ins. Co.

• Decision Date: 25 September 2012
• Docket Number: No. 2011AP192.,2011AP192.
• Citation: 823 N.W.2d 532,2012 WI App 108,344 Wis.2d 494
• Parties: NCR CORPORATION, Plaintiff–Respondent–Cross–Appellant, v. TRANSPORT INSURANCE COMPANY, Defendant–Appellant–Cross–Respondent.
• Court: Wisconsin Court of Appeals

344 Wis.2d 494

823 N.W.2d 532

2012 WI App 108

NCR CORPORATION, Plaintiff–Respondent–Cross–Appellant,

v.TRANSPORT INSURANCE COMPANY, Defendant–Appellant–Cross–Respondent.^†

No. 2011AP192.

Court of Appeals of Wisconsin.

Submitted on Briefs Aug. 7, 2012.

Opinion Filed Sept. 25, 2012.

On behalf of the defendant-appellant-cross-respondent, the cause was submitted on the briefs of G. Michael Halfenger of Foley & Lardner, LLP, Milwaukee; Lawrence D. Mason and John A. Lee of Segal McCambridge Singer & Mahoney, Ltd, Chicago, IL.

On behalf of the plaintiff-respondent-cross-appellant, the cause was submitted on the briefs of Gregory B. Conway and R. George Burnett of Liebman, Conway, Olejniczak & Jerry, S.C., Green Bay; John G. Buchanan III of Covington & Burling LLP, Washington, DC; P. Benjamin Duke of Covington & Burling LLP, New York, NY.

Before HOOVER, P.J., PETERSON and MANGERSON, JJ.

HOOVER, P.J.

[344 Wis.2d 497]¶ 1 Transport Insurance Company appeals a judgment declaring that an excess umbrella policy issued to NCR Corporation provided coverage for NCR's liability for polychlorinated biphenyl (PCB) contamination of the Lower Fox River in Wisconsin. Transport also appeals a judgment entered against it for the $5,000,000 policy limit. Transport argues the circuit court erroneously: chose to apply Wisconsin law rather than Ohio law; granted NCR summary judgment as to whether the damage was expected or intended; and denied Transport's motion to reopen discovery and reconsider the expected-or-intended decision.

¶ 2 NCR cross-appeals, arguing it was entitled to a declaration that Transport was also liable for defense costs.

¶ 3 We hold that the circuit court correctly chose to apply Wisconsin law; erroneously granted summary judgment on the expected-or-intended issue; and properly exercised its discretion to deny the discovery and reconsideration motion. Given our resolution of Transport's appeal, we dismiss NCR's cross-appeal.

BACKGROUND

¶ 4 NCR filed this coverage action in November 2005 against twenty-five insurersthat had issued more than eighty primary and excess general liability insurance policies between 1953 and 1985. NCR sought a declaration of rights under the policies concerning its liability for PCB contamination from a product used in papermaking from approximately 1954 to 1971. Most of the various insurers settled with NCR over the course of the proceedings, and Transport is the only insurer proceeding on appeal.

¶ 5 Transport ¹ issued NCR a policy covering February 1, 1983 to January 1, 1984. The policy provided excess liability coverage, with a $5,000,000 limit per occurrence for indemnity loss, above two underlying layers of general liability insurance. First, a primary layer issued by National Union Fire Insurance Company provided $1,000,000 of primary indemnity coverage per occurrence. Second was an umbrella policy by First State Insurance Company that provided $25,000,000 of indemnity coverage per occurrence. Transport's third-layer policy was part of a $25,000,000 layer of coverage provided together with several other insurers.

¶ 6 The parties conducted an initial phase of discovery limited to the issue of which state's law should apply to the insurance policies, none of which contained a governing-law clause. NCR moved to apply Wisconsin law. Several insurers, including Transport, moved to apply Ohio law. The circuit court issued an eighteen-page decision in October 2007 holding that Wisconsin law applied under both the “grouping of contacts” and “choice-influencing factors” analyses.

¶ 7 Following extensive discovery, NCR and the insurers filed seventeen motions and cross-motions for summary judgment on various coverage issues and defenses, including whether the pollution damages were “expected or intended” and whether there was a “known loss” at the time NCR purchased the policies. The court granted NCR summary judgment on the “expected or intended” issue, but held that material issues of fact precluded summary judgment as to the known-loss doctrine.

¶ 8 Ten days before trial, the court imposed a stay pending our resolution of the appeal in a related case involving NCR's successor, Appleton Papers. After the stay was lifted, the insurers moved to reopen discovery and reconsider the expected-or-intended decision in light of documents obtained by other parties in a related federal court action. The court denied the motion. The four insurers still remaining in the action, including Transport, then stipulated to the factual basis for coverage under the policies, and withdrew all coverage defenses that were set for trial, including their “known loss” defense. Thus, the court granted judgment declaring the insurers liable to NCR for Fox River pollution-related losses under their policies. Transport appeals, and NCR cross-appeals.

DISCUSSION

Choice of Law

¶ 9 Transport argues the circuit court applied the wrong choice-of-law analysis and erroneously applied Wisconsin law to this insurance coverage dispute. Transport contends that because this case involves a contract, we apply only the grouping-of-contacts analysis to determine which state's law applies. Transport seeks to apply Ohio law because Ohio courts have interpreted identical insurance policy language differently than the Wisconsin Supreme Court. Under Ohio's interpretation of the “sudden and accidental” pollution exclusion clause, Transport's policy would not provide coverage for NCR's liability for PCB pollution of the Fox River. We conclude the circuit court correctly chose to apply Wisconsin law.

¶ 10 First, we reject Transport's argument that we must apply only the grouping-of-contacts analysis. Rather, we hold that the contacts analysis is only one step in determining the choice of law. As “Wisconsin's choice-of-law jurisprudence ... has had something of a checkered past”; a question arises as to whether we should apply the contacts analysis, the choice-influencing-factors analysis, or both, in a given type of case. Drinkwater v. American Family Mut. Ins. Co., 2006 WI 56, ¶¶ 32–36, 290 Wis.2d 642, 714 N.W.2d 568. Nonetheless, the court most recently observed that “we need not attempt to reconcile all of the cases.” Id., ¶ 34. It then concluded it should apply the choice-influencing factors because it was deciding an insurance case, which involves “tightly bound” issues of contract and tort. Id., ¶¶ 36–39 (citing State Farm Mut. Auto. Ins. Co. v. Gillette, 2002 WI 31, ¶ 31, 251 Wis.2d 561, 641 N.W.2d 662). The court indicated it would therefore follow Gillette's choice-of-law framework. Id., ¶ 39. Further, the court observed, “The framework in Beloit Liquidating is similar. Thus, we look also to its principles to guide us.” Id. (citing Beloit Liquidating Trust v. Grade, 2004 WI 39, 270 Wis.2d 356, 677 N.W.2d 298).

[344 Wis.2d 501]¶ 11 We believe the case law is largely reconcilable. As the circuit court concluded, albeit by a slightly different rationale, the grouping-of-contacts analysis is subsumed by the choice-influencing-factors analysis. Specifically, the grouping-of-contacts analysis is merely step one of the choice-influencing-factor analysis. Indeed, while not saying as much, the supreme court first conducted a grouping-of-contacts analysis prior to conducting its choice-influencing-factor analysis in Drinkwater, 290 Wis.2d 642, ¶¶ 43–45, 714 N.W.2d 568,Beloit Liquidating, 270 Wis.2d 356, ¶ 24, 677 N.W.2d 298, and Gillette, 251 Wis.2d 561, ¶ 52, 641 N.W.2d 662.See infra, n. 2.

¶ 12 The choice-influencing-factor analysis consists of two steps. “First, we must judge ‘whether the contacts of one state to the facts of the case are so obviously limited and minimal that application of that state's law constitutes officious intermeddling.’ ” Beloit Liquidating, 270 Wis.2d 356, ¶ 24, 677 N.W.2d 298 (quoting American Standard Ins. Co. v. Cleveland, 124 Wis.2d 258, 263, 369 N.W.2d 168 (Ct.App.1985)). Because there is a weak presumption in favor of applying the forum law, the nonforum state's contacts must be clearly more significant for that state to prevail under this first step. Drinkwater, 290 Wis.2d 642, ¶ 40, 714 N.W.2d 568.

¶ 13 Where a contract is involved, we consider the following “grouping of contacts,” set forth in § 188 of the Restatement (Second) of Conflicts: (a) the place of contracting, (b) the place of negotiation of the contract, (c) the place of performance, (d) the location of the subject matter of the contract, and (e) the domicile, residence, nationality, place of incorporation and place of business of the parties. Haines v. Mid–Century Ins. Co., 47 Wis.2d 442, 446, 177 N.W.2d 328 (1970) (citing Restatement (Second) of Conflicts § 188 (Proposed Official Draft, Part II)). Where tort law is implicated, we additionally consider the locations of the injurious conduct and injury.²See Drinkwater, 290 Wis.2d 642, ¶ 44, 714 N.W.2d 568;Beloit Liquidating, 270 Wis.2d 356, ¶ 24, 677 N.W.2d 298;see alsoRestatement (Second) of ConflictsSS § 145 (1971), supra n. 2. Further, there is a special rule in the case of “fire, surety, or casualty insurance”; priority consideration goes to the “state which the parties understood was to be the principal location of the insured risk during the term of the policy.” Haines, 47 Wis.2d at 448, 177 N.W.2d 328(quoting Restatement,supra,§ 193 (Proposed Official Draft, Part II)). If one state's contacts are clearly more significant, we may terminate our analysis and apply that state's law. Drinkwater, 290 Wis.2d 642, ¶¶ 40, 41 n. 5, 43, 45, 714 N.W.2d 568.

¶ 14 If necessary, we next proceed to step two and consider the choice-influencing factors set forth in Heath v. Zellmer, 35 Wis.2d 578, 595, 151 N.W.2d 664 (1967). Drinkwater, 290 Wis.2d 642, ¶ 40, 714 N.W.2d 568;see also Haines, 47 Wis.2d at 450–51, 177 N.W.2d 328 (proceeding to choice-influencing factors after concluding the grouping-of-contacts analysis did not clearly require application of either state's law). The factors are: ...