Olson v. Farrar

• Decision Date: 18 November 2010
• Docket Number: No. 2009AP2385.,2009AP2385.
• Citation: 2010 WI App 165,794 N.W.2d 245,330 Wis.2d 611
• Parties: Todd OLSON, Plaintiff,v.Robert FARRAR, Defendant–Appellant,Mt. Morris Mutual Insurance Company, Intervenor–Defendant–Respondent.†
• Court: Wisconsin Court of Appeals

330 Wis.2d 611

794 N.W.2d 245

2010 WI App 165

Todd OLSON, Plaintiff,

v.Robert FARRAR, Defendant–Appellant,Mt. Morris Mutual Insurance Company, Intervenor–Defendant–Respondent.†

No. 2009AP2385.

Court of Appeals of Wisconsin.

Submitted on Briefs Aug. 6, 2010.Opinion Filed Nov. 18, 2010.

On behalf of the defendant-appellant Robert Farrar, the cause was submitted on the brief of Michael L. Stoker, La Crosse.On behalf of the intervenor-defendant-respondent Mt. Morris Mutual Insurance Company, the cause was submitted on the brief of Jeffrey T. Nichols, Stacy K. Luell, and Daniel K. Mullin of Crivello Carlson, S.C., Milwaukee.Before LUNDSTEN, HIGGINBOTHAM and SHERMAN, JJ.SHERMAN, J.

[330 Wis.2d 616] ¶ 1 Robert Farrar appeals from an order of summary judgment in favor of Mt. Morris Mutual Insurance Company (Mt. Morris). The circuit court concluded as a matter of law that Mt. Morris has no duty to indemnify or defend Farrar, its insured, for any damages or claims arising from or related to an accident which occurred when Farrar was moving a mobile home with his tractor. We conclude that Mt. Morris failed to demonstrate that it was entitled to summary judgment and, therefore, we reverse the court's order and remand this case for further proceedings.

BACKGROUND

¶ 2 Todd Olson filed a complaint against Farrar for damages allegedly sustained to Olson's mobile home and truck when Farrar moved Olson's mobile home to a new location with Farrar's tractor. Olson was following behind the tractor and the mobile home in his truck. The complaint alleged that while Farrar was pulling the mobile home, the tractor “stalled on a hill causing the trailer home to go backwards on the road and crash into [Olson's truck].” Olson alleged that as a result, his vehicle and the mobile home “were extensively damaged.”

¶ 3 On the date that Farrar moved Olson's mobile home, Farrar was insured by an insurance policy issued by Mt. Morris. The policy, which provided Farrar with personal liability coverage for property damage, specifically excluded from coverage “ ‘property damage’ which results from the ownership, operation, maintenance, use ... of ‘motorized vehicles' ... owned or operated by ... an ‘insured.’ ” However, an exception to the exclusion provided that Mt. Morris would pay in the event that “coverage is provided by an Incidental Motorized Vehicle or Watercraft Coverage.” The policy contained the following pertinent incidental motorized vehicle coverage provisions:

INCIDENTAL LIABILITY COVERAGES

This policy provides the following Incidental Liability Coverages. They are subject to all of the “terms” of Coverages L and M....

....

5. Motorized Vehicles—“We” pay for the “bodily injury” or the “property damage” which:

....

b. results from:

....

2) a utility, boat, camp, or mobile home trailer. However, this coverage does not apply to “bodily injury” or “property damage” resulting from a trailer which:

a) is carried on, towed by, or attached to a “motor vehicle” or a “recreational motor vehicle”....

¶ 4 Mt. Morris intervened in the action and moved the circuit court to bifurcate issues relating to insurance coverage from the underlying liability issues. The court granted Mt. Morris's motion and stayed discovery pending a determination of coverage. Mt. Morris subsequently moved the court for summary judgment. The motion sought a declaration that Mt. Morris owed no coverage for the action and the dismissal of it from the action.

¶ 5 The circuit court granted Mt. Morris's motion. The court ruled that there was no coverage under provision 5.b.2) because any property damage resulted from the tractor, not the mobile home.¹ Farrar appeals.

STANDARD OF REVIEW

¶ 6 “We review summary judgments de novo, applying the same methodology as the circuit court.” Hardy v. Hoefferle, 2007 WI App 264, ¶ 6, 306 Wis.2d 513, 743 N.W.2d 843. Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Id.; Wis. Stat. § 802.08(2)(2007-08).²

¶ 7 This appeal requires us to interpret an insurance policy which presents a question of law reviewed independently of the circuit court's determination. Johnson Controls, Inc. v. London Market, 2010 WI 52, ¶ 24, 325 Wis.2d 176, 784 N.W.2d 579.

DISCUSSION

¶ 8 Mt. Morris contends that summary judgment was appropriate in this case because the policy did not provide coverage for the accident and, therefore, Mt. Morris did not have a duty to defend or indemnify Farrar.

Scope of Our Review

¶ 9 Before we address the question of whether coverage for the accident existed under the policy, we first clarify the extent of our review in this case. Both Farrar and Mt. Morris contend that our review is limited to the allegations set forth within the “four corners” of the complaint and the provisions within the policy. We disagree.

¶ 10 When a court is charged with determining whether an insurer has an initial duty to defend its insured, the court review is limited to the language of the insurance contract and the allegations contained within the four corners of the complaint. Estate of Sustache v. American Family Mut. Ins. Co., 2008 WI 87, ¶ 20, 311 Wis.2d 548, 751 N.W.2d 845. In that situation the court is not permitted to look to extrinsic facts or evidence beyond the four-corners of the complaint. Id., ¶ 27. Recent decisions have made clear, however, that when an insurer has not refused to provide a defense prior to a determination of coverage and the question before the court is not whether the insurer has an initial duty to defend its insured but rather whether coverage is provided under the policy in question, the court's review is not limited by the four-corners rule. See, e.g., id., ¶¶ 28–29; Baumann v. Elliott, 2005 WI App 186, ¶¶ 7–11, 286 Wis.2d 667, 704 N.W.2d 361.

¶ 11 Prior to a determination of coverage, an insurer may be required to furnish a free defense to its insured, Kenefick v. Hitchcock, 187 Wis.2d 218, 235, 522 N.W.2d 261 (Ct.App.1994), and a refusal to do so may be a breach of the insurer's duty to defend. Baumann, 286 Wis.2d 667, ¶ 9, 704 N.W.2d 361. However, after a court determines that coverage does not exist under the policy, an insurer is no longer under obligation to provide a defense. Kenefick, 187 Wis.2d at 235, 522 N.W.2d 261. An insurer may dispute the issue of coverage without breaching any initial duty to defend by: (1) seeking a declaratory judgment; (2) entering into an agreement with the insured to defend while retaining the right to challenge coverage; (3) affording a defense under a reservation of right; or (4) seeking a bifurcated trial in which the circuit court decides the issue of coverage in an action separate from the action on the merits of the complaint. Baumann, 286 Wis.2d 667, ¶ 8, 704 N.W.2d 361. In this case, Mt. Morris sought bifurcation of the trial and then sought summary judgment on the issue of coverage. Accordingly, we are “beyond the initial duty to defend stage of the proceedings” and are not constrained by the four-corners rule. Estate of Sustache, 311 Wis.2d 548, ¶ 28, 751 N.W.2d 845.

Coverage Under the Policy

¶ 12 When determining whether coverage is provided under the terms of an insurance policy, we first “examine the facts of the insured's claim to determine whether the policy's insuring agreement makes an initial grant of coverage. If it is clear that the policy was not intended to cover the claim asserted, the analysis ends there.” American Family Mut. Ins. Co. v. American Girl, Inc., 2004 WI 2, ¶ 24, 268 Wis.2d 16, 673 N.W.2d 65. If, however, an initial grant of coverage in the insuring agreement is triggered by the claim, “we next examine the various exclusions to see whether any of them preclude coverage.” Id. Policy exclusions are narrowly or strictly construed and we resolve any ambiguities in favor of coverage. Sass v. Acuity, 2009 WI App 32, ¶ 6, 316 Wis.2d 752, 765 N.W.2d 582. If it appears that an exclusion precludes coverage, “we then look to see whether any exception to that exclusion reinstates coverage.” American Family Mut. Ins. Co., 268 Wis.2d 16, ¶ 24, 673 N.W.2d 65. “Our goal in interpreting insurance contracts is to discern and give effect to the intent of the parties.” Folkman v. Quamme, 2003 WI 116, ¶ 16, 264 Wis.2d 617, 665 N.W.2d 857.

¶ 13 Under provision 5.b.2) of the policy's “Motorized Vehicles” incidental coverage, the policy provides incidental liability coverage for property damage “result[ing] from ... a ... mobile home trailer” unless the property damage “result[ed] from a trailer which: a) is carried on, towed by, or attached to a ‘motor vehicle’ or a ‘recreational motor vehicle.’ ” The policy excludes from coverage property damage resulting from a motorized vehicle unless coverage was provided under the policy's incidental motorized vehicle provisions. The policy also excludes from coverage property damage if the property is “occupied by, used by, or in the care of an ‘insured.’ ” There appear to be no exceptions to these exclusions.

¶ 14 Thus, for there to be coverage in the present case under the policy's motorized vehicle incidental liability coverage: (1) the property damage must have resulted from a “mobile home trailer”; (2) the “trailer” must not have been “towed by, or attached to a ‘motor vehicle’ ”; and (3) the property damaged must not have been “occupied by, used by, or in the care of” Farrar.

1. Whether Olson's Property Damage Resulted from a “Mobile Home Trailer”

¶ 15 Farrar contends that the policy provides coverage because, under the policy language in provision 5.b.2), the property damage to Olson's mobile home and truck “result[ed] from ... a ... mobile home trailer.” Mt. Morris contends that neither the damage to Olson's mobile home nor the damage to Olson's truck “result[ed] from” Olson's “mobile home trailer.” ³ Rather, Mt. Morris argues that the undisputed evidence shows that the damage resulted from Farrar's...