School Dist. of Shorewood v. Wausau Ins. Companies
| Decision Date | 27 August 1992 |
| Docket Number | 90-1707,Nos. 90-1440,s. 90-1440 |
| Citation | 170 Wis.2d 347,488 N.W.2d 82 |
| Parties | , 77 Ed. Law Rep. 457 SCHOOL DISTRICT OF SHOREWOOD, a school district, Plaintiff-Appellant, d v. WAUSAU INSURANCE COMPANIES, an insurance corporation, and Continental Casualty Company, a foreign corporation, Defendants-Respondents. SCHOOL DISTRICT OF GREENFIELD, a school district, Plaintiff-Appellant, d v. WAUSAU INSURANCE COMPANIES, an insurance corporation, and U.S. Fire Insurance Company, a foreign corporation, Defendants-Respondents. . On Motion for Reconsideration |
| Court | Wisconsin Supreme Court |
For the plaintiffs-appellants, there was a brief by Warren L. Kreunen, Timothy G. Dugan, and von Briesen & Purtell, S.C., Milwaukee, and oral argument by Timothy G. Dugan.
For the defendant-respondent, Continental Cas. Co., there was a brief by Edward A. Hannan, M. Susan Maloney, Marjorie M. Greene and Godfrey, Trump and Hayes, Milwaukee, and oral argument by Edward A. Hannan.
For the defendant-respondent, Wausau Ins. Companies, there were briefs (in the Court of Appeals) by James G. Doyle, Paul J. Kelly and Schellinger & Doyle, Brookfield, and oral argument by Paul J. Kelly.
For the defendant-respondent, U.S. Fire Ins. Co., there were briefs (in the Court of Appeals) by John M. Swietlik, John E. Cain and Kasdorf, Lewis & Swietlik, S.C., Milwaukee, and oral argument by John M. Swietlik.
Amicus curiae brief was filed by Charles H. Bohl, Tamara A. Hayes, and Frisch Dudek, Ltd, Milwaukee, for Wis. Counties Ass'n.
The issues before this court concern whether certain insurance policies provide coverage for the legal expenses incident to a discrimination action that seeks declaratory and injunctive relief. The case joins separate but similar claims by the School District of Shorewood (Shorewood) and the School District of Greenfield (Greenfield) against their respective insurance carriers to recover under their insurance policies for attorney fees and disbursements relating to a settlement agreement in the underlying discrimination action. The circuit court granted summary judgment in favor of the insurance carriers, holding that the insurance policies at issue provided coverage for actions seeking "damages," not those seeking only declaratory and injunctive relief. The court of appeals certified the case to this court and we accepted the certification pursuant to sec. (Rule) 809.61, Stats.
Three issues are raised on this appeal. The first issue is whether allegations of discrimination as set forth in the underlying litigation fall within the scope of the insurance policies. We hold that the insurance policies, which exclude coverage for injuries that are expected, intended, or committed by or at the direction of the insured, do provide coverage for Shorewood and Greenfield where the underlying amended complaint alleges that the school districts were "affected by" the discriminatory acts of other governmental agencies.
The second issue is whether the declaratory and injunctive relief sought in the underlying litigation constituted "damages," thereby imposing upon the insurance carriers a duty to defend and indemnify the insureds in the underlying litigation. We hold that the insurance carriers had no duty to defend or indemnify Shorewood and Greenfield in the underlying action because the declaratory and injunctive relief sought do not constitute "damages" under the insurance policies.
The third issue is whether attorney fees sought in the underlying discrimination action, expended by the school districts in their defense, and paid by the school districts under the settlement agreement constituted "damages," thereby imposing upon the insurance carriers a duty to defend and indemnify the insured school districts. We hold that the insurance carriers had no duty to defend or indemnify Shorewood and Greenfield based upon the request for attorney fees in the underlying amended complaint. The request for attorney fees under 42 U.S.C. sec. 1988 does not create a duty to defend on the part of the insurers because attorney fees are treated as "costs" of litigation under that federal provision and, thus, do not constitute "damages." Furthermore, we hold that the insurers had no obligation to indemnify the school districts for the attorney fees incurred by the school districts to defend themselves in the underlying action because the insurers had no duty to defend the school districts from the outset. We also hold that the insurers had no obligation to indemnify Shorewood and Greenfield for the attorney fees which the school districts agreed to pay under the settlement agreement because the insurers did not participate in or consent to the settlement agreement and the insurance policies exclude coverage for liability assumed by the insured under any contract or agreement.
The facts are not in dispute. Twenty separate one-year insurance policies are involved in the present case. The insurance policies were issued by three separate insurance carriers: Continental Casualty Company (CNA), Wausau Insurance Companies (Wausau), and United States Fire Insurance Company (U.S. Fire).
During the relevant period of time, CNA issued three separate one-year comprehensive general liability insurance policies and three separate one-year umbrella excess liability insurance policies to Shorewood. Wausau issued six one-year umbrella policies to Shorewood. In addition, Wausau issued three one-year general liability policies and a single one-year umbrella policy to Greenfield. U.S. Fire issued three one-year general liability policies and a single one-year umbrella policy to Greenfield.
All of the insurance policies contained virtually identical statements with respect to the basic grant of coverage and the insurer's duty to defend. The basic grant of coverage under the policies provided that the insurer would pay all sums "which the insured shall become legally obligated to pay as damages" because of personal injury covered by the policies. 1 Under these policies, the insurers also agreed to "defend any suit against the insured seeking damages on account of such [personal injury] even if any of the allegations of the suit are groundless, false or fraudulent." Furthermore, most of the insurance policies at issue here provided insurance coverage for virtually the same types of injuries and property damage. 2 They covered only those personal injuries that were "neither expected nor intended" nor "committed by or at the direction of the insured." Thus, personal injury intended by the insured was excluded from coverage under these policies.
The underlying action, Board of School Directors of the City of Milwaukee, et al. v. State of Wisconsin, et al., was initiated in the United States District Court for the Eastern District of Wisconsin. An amended complaint was filed by the Board of School District of the City of Milwaukee, individual board members, and several children ("plaintiffs"). The plaintiffs named the State of Wisconsin, the Governor of Wisconsin, the Superintendent of Public Instruction, various state agencies, and 24 school districts, including Shorewood and Greenfield, as defendants.
The preliminary statement of the amended complaint stated, in part:
1. This complaint requests declaratory and injunctive relief to redress the deprivation under color of state law of the rights, privileges, and immunities secured by the Constitutions and laws of the United States and the State of Wisconsin to the plaintiffs and the schoolchildren of the City of Milwaukee. It seeks to remedy the illegal racial segregation and the resulting inequality of educational opportunity and metropolitan-wide racially dual structure of education created and maintained by defendants in the Milwaukee metropolitan area.
The amended complaint alleged that the school districts were participating in intentional acts of discrimination and were "affected by" the conduct of other governmental agencies that contributed to racial segregation. The plaintiffs claimed that such conduct violated the Thirteenth and Fourteenth Amendments to the United States Constitution, various federal civil rights provisions, and the Wisconsin Constitution.
In the amended complaint, the plaintiffs prayed for the following relief:
WHEREFORE, plaintiff Milwaukee Board respectfully requests that [the] Court:
(a) enter an order ... declaring that defendants and their predecessors created, maintained, and continue to perpetuate a racially dual structure of public education ... in violation of the Fourteenth Amendment to the Constitution of the United States, the Constitution of the State of Wisconsin, and Federal and State law;
(b) enter an order requiring the defendants ... to cease their illegal and unconstitutional conduct and to implement a plan to correct the constitutional violations referred to above.... The plan should include the reorganization and consolidation of school districts; the establishment of magnet schools; the nondiscriminatory school assignment and transportation of pupils to reduce racial segregation; the desegregation of faculty and staff; procedures for nondiscrimination in classroom and program assignments and in discipline; compensatory programs to overcome the effects of past discrimination; exemptions from mandatory transportation of pupils for racially integrated neighborhoods; the provision of bilingual education for limited and non-English speaking students as necessary; and such other provisions and programs as are needed to eliminate the remaining vestiges of segregation in the school districts and schools in the Milwaukee metropolitan area....
(c) enter an order pursuant to 42 U.S.C. § 1988 allowing plaintiffs their costs and reasonable attorneys' fees in prosecuting this complaint; and
(d) grant such other and further relief as the Court finds just and proper.
Shorewood and Greenfield notified CNA, Wausau, and U.S. Fire of the underlying litigation...
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