Scottish Guarantee Ins. Co., Ltd. v. Dwyer

• Decision Date: 18 March 1994
• Docket Number: No. 92-4142,92-4142
• Citation: 19 F.3d 307
• Parties: , 24 Envtl. L. Rep. 21,345 SCOTTISH GUARANTEE INSURANCE COMPANY, LIMITED, Plaintiff-Appellant, v. Dennis B. DWYER, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 307

19 F.3d 307

62 USLW 2688, 24 Envtl. L. Rep. 21,345

SCOTTISH GUARANTEE INSURANCE COMPANY, LIMITED, Plaintiff-Appellant, v. Dennis B. DWYER, Defendant-Appellee.

No. 92-4142.

United States Court of Appeals Seventh Circuit.

Argued Sept. 23, 1993.

Decided March 18, 1994.

Thomas R. Schrimpf (argued), Jeffrey S. Fertl, Hinshaw & Culbertson, Milwaukee, WI, for plaintiff-appellant.

Edwin E. Brooks, Karyn G. Gershon (argued), Richard M. Seligman, Lori Meehan, Katten, Muchin & Zavis, Chicago, IL, for defendant-appellee.

Before BAUER, CUDAHY, and ROVNER, Circuit Judges.

ILANA DIAMOND ROVNER, Circuit Judge.

This diversity case requires us to consider a question we reserved in Pipefitters Welfare Educ. Fund v. Westchester Fire Ins. Co., 976 F.2d 1037 (7th Cir.1992)--whether allegations of negligent trespass to property constitute a "wrongful entry" under the "personal injury" portion of a commercial insurance policy. We were able to sidestep this question under Illinois and Missouri law in Pipefitters because the definition of a "personal injury" in the policy there was not limited to either a wrongful entry or an eviction; it also encompassed "other invasion[s] of the right to private occupancy." Id. at 1040. We thus relied on that catch-all phrase in finding that the insurer had a duty to defend its insured against a negligent trespass claim. Id. at 1041-42. The policy here, however, does not provide this easy way out, as it defines a personal injury only as a "[w]rongful entry into, or eviction of a person from, a room, dwelling or premises." We nonetheless hold that under Wisconsin law, the insurer is obligated to defend its insured because the underlying complaints allege a wrongful entry within the meaning of the policy. We thus affirm the district court's judgment to that effect.

I. BACKGROUND

This declaratory judgment action grows out of two complaints filed against Dennis Bruce Dwyer and others in the Circuit Court of Rock County, Wisconsin (the "Rock County actions"). The plaintiffs in the two suits owned various parcels of real property, including ground wells, in Beloit, Wisconsin that allegedly were contaminated when chemicals were released into the soil during a fire on the neighboring property of Dwyer's father. The blaze destroyed a building that housed materials used in Dwyer's insulation business as well as pesticides and herbicides used in his father's seed and fertilizer business. The chemicals allegedly were washed into the ground with the water utilized to fight the fire. The plaintiffs in the underlying suits allege that the chemicals have infiltrated their wells, contaminating their water supplies. They allege damage to their real property as well as personal injuries caused by the ingestion and use of the contaminated water. The complaints assert an entitlement to relief under various legal theories, the most important for our purposes being a negligent trespass to property.

Dwyer tendered the suits to Scottish Guarantee Insurance Company, Limited ("Scottish") for defense and indemnification under a policy he had purchased for his insulation business. Scottish denied a defense on the ground that the allegations in the underlying complaints fell under the policy's pollution exclusion. ¹ Scottish later filed this declaratory judgment action under our diversity jurisdiction, again asserting that it had no duty to defend or to indemnify Dwyer under the policy. Dwyer counterclaimed, alleging coverage under the personal injury portion of the policy, which he maintained is not subject to the pollution exclusion. By its terms, the pollution exclusion applies only to bodily injury and property damage liability ("Coverage A"), and the parties agreed below that this exclusion negates any duty to defend under Coverage A. Yet a separate provision provides coverage for personal or advertising injuries ("Coverage B"), and that portion of the policy, as Dwyer noted below, is not subject to the pollution exclusion. Scottish maintained, however, that the Rock County complaints do not allege "personal injuries" as that term is defined in Coverage B.

The parties filed cross-motions for summary judgment on Scottish's duty to provide a defense under the policy's personal injury provision. The district court referred the motions to a magistrate-judge, who recommended that Dwyer's motion be granted. The district court adopted that recommendation and held that Scottish has a duty to defend the Rock County lawsuits because the complaints there arguably allege a wrongful entry within the scope of Coverage B. The court also granted Dwyer's motion for attorney's fees and costs. We review the district court's grant of summary judgment de novo. Pipefitters, 976 F.2d at 1039; La Preferida, Inc. v. Cerveceria Modelo, S.A. de C.V., 914 F.2d 900, 905 (7th Cir.1990). Under Wisconsin law, which the parties agree is governing here, the construction of language in an insurance policy is a question of law that we consider independently of the lower court. Continental Corp. v. Aetna Casualty & Sur. Co., 892 F.2d 540, 543 (7th Cir.1989); Smith v. Atlantic Mut. Ins. Co., 155 Wis.2d 808, 456 N.W.2d 597, 598 (1990).

II. DISCUSSION

A. Duty to Defend

In determining whether Scottish has a duty to defend Dwyer under Wisconsin law, we look to the allegations in the Rock County complaints, as we must determine whether those complaints "allege facts which, if proven, would give rise to liability covered under the terms and conditions of the policy." Sola Basic Indus., Inc. v. United States Fidelity & Guar. Co., 90 Wis.2d 641, 280 N.W.2d 211, 213 (1979); see also Newhouse v. Citizens Sec. Mut. Ins. Co., 176 Wis.2d 824, 501 N.W.2d 1, 5 (1993); School Dist. of Shorewood v. Wausau Ins. Cos., 170 Wis.2d 347, 488 N.W.2d 82, 87-88 (1992). We are concerned only with the nature of the claims alleged against the insured, and not with their relative merits. School Dist. of Shorewood, 488 N.W.2d at 87. Any doubt about the duty to defend must be resolved in favor of the insured. Id.; see also Newhouse, 501 N.W.2d at 5.

Wisconsin treats an insurance policy as any other contract and applies the same rules of construction. Maas v. Ziegler, 172 Wis.2d 70, 492 N.W.2d 621, 624 (1992); Atlantic Mutual, 456 N.W.2d at 598; Kremers-Urban Co. v. American Employers Ins. Co., 119 Wis.2d 722, 351 N.W.2d 156, 163 (1984). Wisconsin courts construe contracts so as to carry out the intentions of the parties, and they accord language in an insurance contract "the common and ordinary meaning it would have in the mind of a lay person." Kremers-Urban Co., 351 N.W.2d at 163; see also Grotelueschen v. American Family Mut. Ins. Co., 171 Wis.2d 437, 492 N.W.2d 131, 134 (1992). The test under Wisconsin law is not what the insurer intended by its use of certain language, "but what a reasonable person in the position of the insured would have understood the words to mean." Kremers-Urban Co., 351 N.W.2d at 163; see also Ziegler, 492 N.W.2d at 625; School Dist. of Shorewood, 488 N.W.2d at 88-89. Any ambiguity in the scope of coverage must be resolved in favor of the insured, and policy exclusions are to be construed narrowly against the insurer. Atlantic Mutual, 456 N.W.2d at 598; see also Continental Corp., 892 F.2d at 543. An ambiguity arises when words or phrases in a policy "are susceptible to more than one reasonable construction;" yet, when the terms of an insurance policy are plain and unambiguous, the court must apply those terms as written. Atlantic Mutual, 456 N.W.2d at 598; see also Grotelueschen, 492 N.W.2d at 134. We must not construe the present policy so as to "include insurance coverage not agreed to by the parties and for which [Scottish] was not paid." School Dist. of Shorewood, 488 N.W.2d at 89; see also Ziegler, 492 N.W.2d at 624.

The Scottish policy defines a "personal injury" as:

injury, other than "bodily injury", arising out of one or more of the following offenses:

a. False arrest, detention or imprisonment;

b. Malicious prosecution;

c. Wrongful entry into, or eviction of a person from, a room, dwelling or premises that the person occupies;

d. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services; or

e. Oral or written publication of material that violates a person's right to privacy.

Dwyer maintains that the chemical trespass counts of the Rock County complaints allege a "wrongful entry" under the policy. Scottish concedes that the underlying actions allege a negligent trespass, but it maintains that the term "wrongful entry," like the other offenses constituting "personal injuries" under Coverage B, requires an intentional rather than merely a negligent act. See, e.g., Gregory v. Tennessee Gas Pipeline Co., 948 F.2d 203, 209 (5th Cir.1991) ("Each of the enumerated risks specifically assumed requires active, intentional conduct by the insured.").

We addressed a similar argument in Pipefitters. ² There, a "personal injury" was defined as, among other things, a "wrongful entry or eviction or other invasion of the right to private occupancy." 976 F.2d at 1040. The insurer maintained, as Scottish does here, that this definition only encompassed conduct evidencing an intention to take possession of the property or to deprive another of its right to occupancy. Because its insured lacked such an intent when it negligently permitted toxic chemicals to contaminate another's property, the insurer argued that the underlying complaint did not allege a "personal injury" within the scope of the policy. We agreed that the plain meaning of the term "eviction" denoted an intention to deprive another of the right to private occupancy. Id. Yet we then considered whether the term "wrongful entry" or the phrase "other invasion of the right to private occupancy" denoted a similar intent. We concluded that "[b]oth Missouri and Illinois courts recognize...