Northwestern Nat. Ins. Co. v. Nemetz

• Decision Date: 18 November 1986
• Docket Number: No. 85-1762,85-1762
• Parties: NORTHWESTERN NATIONAL INSURANCE CO., Plaintiff, v. Walter A. NEMETZ, Hazel M. Nemetz, Defendants, Auto-Owners Insurance Co., Defendant-Co-Appellant and Cross-Respondent, Germantown Mutual Insurance Co., Defendant-Appellant, Evelyn M. Nelson and Robert Nelson, d/b/a Nelson's Grocery, Defendants-Third- Party Plaintiffs-Respondents and Cross-Appellants, Crandon Insurance Center, Third-Party Defendant, Utica Mutual Insurance Co., Third-Party Defendant and Cross-Respondent.
• Court: Wisconsin Court of Appeals

Page 33

400 N.W.2d 33

135 Wis.2d 245

NORTHWESTERN NATIONAL INSURANCE CO., Plaintiff, v. Walter A. NEMETZ, Hazel M. Nemetz, Defendants, Auto-Owners Insurance Co., Defendant-Co-Appellant and Cross-Respondent, Germantown Mutual Insurance Co., Defendant-Appellant, Evelyn M. Nelson and Robert Nelson, d/b/a Nelson's Grocery,

Defendants-Third- Party Plaintiffs-Respondents and

Cross-Appellants,

Crandon Insurance Center, Third-Party Defendant,

Utica Mutual Insurance Co., Third-Party Defendant and

Cross-Respondent.

No. 85-1762.

Court of Appeals of Wisconsin.

Argued Oct. 6, 1986.

Opinion Released Nov. 18, 1986.

Opinion Filed Nov. 18, 1986.

Review Denied.

Dennis J. Verhaagh, Green Bay, for defendant-appellant, Germantown Mut. Ins. Co.

Michael G. Grzeca, Everson, Whitney, Everson & Brehn, S.C., Green Bay, for defendant-co-appellant and cross-respondent, Auto-Owners Insurance Co.

D.J. Weis, Rhinelander, argued, for defendants-third-party plaintiffs-respondents and cross-appellants, Evelyn M. Nelson, Robert Nelson, d/b/a Nelson's Grocery; Ronald S. Aplin of Johnson, Weis, Paulson & Priebe, S.C., Rhinelander, on brief.

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

CANE, Presiding Judge.

Germantown Mutual Insurance Company and Auto-Owners Insurance Company appeal a judgment awarding damages to Evelyn and Robert Nelson. Germantown and Auto-Owners contend that the trial court erred by construing their property insurance policies to afford liability coverage to Hazel Nemetz, whose husband, Walter, allegedly intended or expected the burning of a structure occupied by the Nemetzes' tavern and the Nelsons' adjoining hardware store. Auto-Owners and Germantown also claim other errors, including improper closing arguments by counsel, insufficient evidence to support the jury's damage award, and the trial court's refusal to allow certain special verdict questions and to give certain proposed jury instructions.

The Nelsons cross-appeal, arguing that the trial court erred by changing a special verdict question finding that Walter Nemetz had not intended or expected the damage to the Nelsons' property. We conclude that the Auto-Owners and Germantown policies afford liability coverage to Hazel regardless of her husband's culpability and

that the trial court correctly formed the special verdict and properly instructed the jury. We therefore need not address issues concerning Walter's [135 Wis.2d 251] intent. Furthermore, we conclude that credible evidence supports the damage award. Accordingly, we affirm the trial court's judgment and order.

FACTS

The issues demand a detailed review of the facts. In the summer of 1980, Walter Nemetz gave a man $600 and a shotgun after proposing the idea of burning the Nemetzes' tavern in the Town of Newald, Wisconsin. The scheme languished for several months while the Nemetzes wintered in Florida, until Walter directed Hazel to write the man and urge him to perform the arson before the Nemetzes returned to Newald. Hazel renewed the couple's liability policy with Germantown in May, 1981, after she knew of Walter's plan. The couple was also insured under a separate policy with Auto-Owners. Despite the letters to the prospective arsonist, however, the Nemetzes' tavern stood untouched when the couple returned from Florida in June. On their first day back, Walter told Hazel that he would set the fire himself. Hazel repeatedly argued with him, urging Walter not to burn the tavern.

Several days later, Walter invited their neighbors, the Nelsons, to go out to dinner with them on the evening of June 17, 1981. Despite past conflicts with the Nemetzes, the Nelsons accepted the invitation. The Nelsons owned the hardware store adjacent to the tavern, including the common wall separating the two businesses. Before departing on the evening of the 17th, however, the Nelsons told the Nemetzes that they noticed a strong odor of gasoline coming from the building. Hazel then recalled her discussions with Walter about burning the tavern. The Nelsons summoned local firefighters, but before they could discover the source of the gasoline fumes, the tavern exploded. Both the Nemetzes' tavern and the Nelsons' hardware store burned to the ground. Walter was hospitalized for burns received when he entered the tavern as it exploded. The others escaped injury.

On July 16, Walter gave a written statement admitting that he had poured gasoline on the tavern's floor on the evening of the fire. He stated that he had intended "that the building would burn when the gasoline fumes became ignited by some means." Hazel witnessed her husband make this statement in his hospital room, and she read it back to him before he signed it. Although all of the parties agreed that the explosion and fire were fueled by the gasoline, the actual cause of ignition was undetermined. In September, Hazel executed a sworn proof of loss statement to Auto-Owners stating that the cause and origin of the loss were undetermined.

The matter came to trial in May, 1985. Neither Hazel nor Walter Nemetz appeared. At the trial's close, in response to a five-part special verdict question, ¹ the jury answered that neither Walter nor Hazel intended or expected damages to the Nelsons' property. The jury also found that both Walter and Hazel were negligent with respect to the Nelsons' property. Because of its negative answers to both intent The trial court supplied an answer to the conspiracy question, finding that the record showed no evidence of a conspiracy on Hazel's part regarding the setting of the fire. The trial court granted the Nelsons a judgment of $80,000, representing the $50,000 already paid by the Nelsons' insurer and $30,000 for loss of personal property.

questions, the jury did not answer question five. Question five required a finding regarding Hazel's involvement in a conspiracy to set the fire only if the jury found intent on Walter's part, but not Hazel's. Following motions after verdict, the trial court changed the jury's answer to the question of Walter's intent, holding that no credible evidence supported the jury's finding that Walter did not intend or expect the damage to the Nelsons' property.

POLICY CONSTRUCTION

Auto-Owners argues that the trial court erred by finding liability coverage for Hazel Nemetz under its policy. Auto-Owners relies on an exclusion for liability for damage expected or intended by an insured. ² Thus, Auto-Owners contends that its policy affords Hazel no coverage because the trial court found that Walter, "an insured," intended or expected the damage. We conclude that when read together with the "severability of interest" clause, Auto-Owners' intentional acts exclusion is ambiguous. Thus, the Auto-Owners policy affords liability coverage for Hazel regardless of any intentional acts on Walter's part.

We may not modify the unambiguous language of an insurance policy. State Farm Mutual Automobile Insurance Co. v. Rechek, 125 Wis.2d 7, 9, 370 N.W.2d 787, 789 (Ct.App.1985). However, where an ambiguity exists, we must construe the policy against its drafter and in favor of the insured. Id. at 10, 370 N.W.2d at 789. An ambiguity exists when the policy is reasonably susceptible to more than one construction from the viewpoint of a reasonable person of ordinary intelligence in the position of the insured. Hartland Cicero Mutual Insurance Co. v. Elmer, 122 Wis.2d 481, 487, 363 N.W.2d 252, 255 (Ct.App.1984).

Our supreme court concluded that a policy exclusion for an intentional act of the insured did not bar liability coverage to the "innocent" spouse of a man who intentionally destroyed the couple's house. Hedtcke v. Sentry Insurance Co., 109 Wis.2d 461, 488-89, 326 N.W.2d 727, 740 (1982). In Hedtcke, a husband intentionally burned down the family's home several days before a divorce order would have compelled him to vacate the house. The insurance policy named both the husband and the wife and excluded coverage for hazards "increased by any means within the control or knowledge of the insured." Id. at 480, 326 N.W.2d at 736 [emphasis added]. The Hedtcke court construed the policy to provide separate coverage for the interests of each insured. The Hedtcke court applied the "reasonable insured" standard to arrive at this construction, stating that "the person owning an undivided interest in property and being a named insured would reasonably Here, no construction is necessary to determine that Walter and Hazel had separate interests under the Auto-Owners policy. The policy contains a "severability of interest" condition stating: "This insurance applies separately to each insured person against whom a claim or suit is brought...." Because the Hedtcke court found severability of interests, it concluded that the exclusion barring coverage for intentional acts of the insured did not operate to eliminate coverage for an "innocent" person who was co-insured under the same policy. The Hedtcke court, however, explicitly reserved judgment on whether an insurer could jointly obligate the insureds so that the intentional act of only one would place the other outside the policy's coverage. Id. at 487-88, 326 N.W.2d at 740.

suppose that his or her individual interest in the property was covered by the policy." Id. at 487, 326 N.W.2d at 739.

Hedtcke harmonized the insureds' separate interests with their separate obligations to refrain from intentionally damaging property. Here, however, we face an insurance contract with a severability clause purporting to separate the insureds' interests while the exclusion clause, "we do not cover ... damage ... expected or intended by an insured", attempts to join the insureds' obligations. We conclude that this contract is ambiguous because the severability clause creates a reasonable expectation that each insured's interests are separately covered, while the exclusion clause attempts to exclude coverage for both caused by the act of only one. Thus, we must construe the policy against...