SHOREWOOD SCHOOL DIST. v. Wausau Ins., 90-1440
| Decision Date | 20 May 1992 |
| Docket Number | No. 90-1440,90-1707.,90-1440 |
| Citation | 168 Wis.2d 390,484 N.W.2d 314 |
| Parties | SCHOOL DISTRICT OF SHOREWOOD, a school district, Plaintiff-Appellant, v. WAUSAU INSURANCE COMPANIES, an insurance corporation, and Continental Casualty Company, a foreign corporation, Defendant-Respondents. SCHOOL DISTRICT OF GREENFIELD, a school district, Plaintiff-Appellant, v. WAUSAU INSURANCE COMPANIES, an insurance corporation, and U.S. Fire Insurance Company, a foreign corporation, Defendants-Respondents. |
| Court | Wisconsin Supreme Court |
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For the plaintiffs-appellants, there was a brief by Warren L. Kreunen, Timothy G. Dugan, and von Briesen & Purtell, S.C. and oral argument by Mr. Dugan.
For the defendant-respondent, Continental Casualty Company, there were brief by Edward A. Hannan, M. Susan Maloney, Marjorie M. Greene and Godfrey, Trump and Hayes, Milwaukee and oral argument by Mr. Hannan.
For the defendant-respondent, Wausau Insurance Companies, there were briefs (in the Court of Appeals) by James G. Doyle, Paul J. Kelly and Schellinger & Doyle, Brookfield and oral argument by Mr. Kelly.
For the defendant-respondent, U.S. Fire Insurance Company, 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 Mr. Swietlik.
Amicus Curiae brief was filed by Charles H. Bohl, Tamara A. Hayes, and Frisch Dudek, Ltd., Milwaukee for Wisconsin Counties Association.
This is an appeal from judgments of the circuit court for Milwaukee County, Victor Manian, Circuit Judge, granting the insurance carriers' motions for summary and declaratory judgment and denying the school districts' motions for summary and declaratory judgment.
These cases center on the term "damages" as that term is used in insurance policies promising to pay sums that the insureds are "legally obligated to pay as damages." The circuit court held that complaints alleging racial discrimination and seeking declaratory, injunctive and remedial relief and attorney fees do not constitute actions for "damages" within the policies.
This court accepted the appeal on certification from the court of appeals pursuant to sec. (Rule) 809.61, Stats. The court of appeals described the issues as follows: (1) whether costs of compliance incurred by an insured in a civil rights action seeking only injunctive relief constitute "damages," and (2) whether in a civil rights action attorney fees and costs under 42 U.S.C. sec. 1988 constitute "damages."
For the reasons set forth, we conclude that the insurance policies, in providing for reimbursement of "all sums which the insured shall become legally obligated to pay as damages," required the insurance carriers to defend the underlying racial discrimination litigation seeking declaratory, injunctive and remedial relief and to reimburse the two school districts for their own attorney fees incurred in defending the underlying litigation. We further conclude that the insurance carriers must reimburse the school districts for expenditures incurred in abiding by the terms of the settlement agreement. These expenditures include funding programs to remedy alleged discrimination and paying the attorney fees for the lawyers representing an opposing party. Accordingly we reverse the judgments dismissing the school districts' complaints. We remand the cause to the circuit court to grant the school districts' motions for summary judgment on the issue of the insurance carriers' obligation to defend the two school districts in the underlying litigation. On remand the circuit court must determine the amount due under the policies to reimburse the school districts for their own attorney fees and for the expenditures incurred in abiding by the terms of the settlement agreement.
We shall first state the facts. We shall then discuss (1) whether the allegations of racial discrimination in the underlying litigation fall within the scope of the insurance policies; (2) whether the declaratory, injunctive and remedial relief sought in the underlying litigation constitutes "damages" within the school districts' insurance policies, thereby imposing on the insurance carriers a duty to defend and indemnify the insured; and finally (3) whether the opposing parties' attorney fees sought from the school districts in the underlying litigation constitute "damages" within the policies.
In their motions for summary judgment, no party asserted a disputed issue of material fact. The interpretation of insurance policies issued by Continental Casualty Company, Wausau Insurance Companies and United States Fire Insurance Company is in dispute. The school district of Greenfield claims coverage under four one-year policies issued by U.S. Fire covering the periods from July 1, 1978 to July 1, 1981 and July 1, 1983 to July 1, 1984; three one-year combination casualty policies issued by Wausau covering the period from July 1, 1981 to July 1, 1984; and one one-year umbrella policy issued by Wausau covering the period from July 1, 1981 to July 1, 1982. The school district of Shorewood claims coverage under four one-year policies issued by Continental Casualty covering the period from July 1, 1977 to July 1, 1981; and six one-year umbrella policies issued by Wausau covering the period from July 1, 1981 to July 1, 1987.
For purposes of this appeal, the insurance policies provide essentially identical coverage and the same duty to defend. The policies obligate the insurance carriers to pay all sums, within the amount of coverage provided by the policy, "which the insured shall become legally obligated to pay as damages" because of "personal injury" or "discrimination injury" covered by the policies.1 (Emphasis added.) The policies define "personal injury" or "discrimination injury" to include only discrimination that is "neither expected nor intended" by the insured or discrimination that is not "committed by, at the direction of, or with consent of the insured."2
The insurance carriers also obligated themselves, for injuries covered by a policy, to "defend any suit against the insured alleging such injury . . . and seeking damages on account thereof, even if such suit is groundless, false or fraudulent."3
In the underlying federal racial discrimination litigation, Board of School Directors of the City of Milwaukee v. State of Wisconsin, No. 84-C-0877 (E.D. Wis., filed July 26, 1984), the school districts of Shorewood and Greenfield were named as defendants, along with 22 other suburban school districts, the State of Wisconsin, and several state agencies and officers. The Board of School Directors of the City of Milwaukee (Milwaukee Board) and two of its members and their children brought the suit seeking to remedy allegedly illegal racial segregation and inequality of educational opportunity in the Milwaukee metropolitan area. The National Association for the Advancement of Colored People (NAACP) was permitted to intervene as a plaintiff and the court certified the litigation as a class action.
The amended complaint included a request for declaratory, injunctive and remedial relief, stated as follows:
1. This complaint request 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 intentionally participated in interdistrict and intradistrict constitutional violations that "reinforced racial isolation in the Milwaukee metropolitan area." The amended complaint further stated that the suburban school districts were joined in the litigation because they were "affected by" the constitutional violations of the state and its agencies and therefore the school districts' participation was necessary to any adequate remedy. According to the Milwaukee Board, the conduct of the school districts, the state, and its agencies allegedly violated the Thirteenth and Fourteenth Amendments of the United States Constitution; the Supremacy Clause of the United States Constitution, art. IV, clause 2; 42 U.S.C. secs. 1981, 1983, 1985, and 2000d; art. I, sec. 1 and art. X, sec. 3 of the Wisconsin Constitution; and secs. 116.51(2)4 and 118.13, Wis. Stats. 1981-82.
Claiming no adequate remedy available at law, the Milwaukee Board prayed for declaratory, injunctive and remedial relief, costs and attorney fees, and whatever other relief the court found just and proper. The prayer for relief in the amended complaint stated:
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