Smith v. Anderson

Decision Date27 April 2017
Docket NumberNo. 2015AP79,2015AP79
Citation893 N.W.2d 790,374 Wis.2d 715,2017 WI 43
Parties Maya Elaine SMITH, Plaintiff, v. Jeff ANDERSON, d/b/a Anderson Real Estate Services, Defendant-Third-Party Plaintiff, v. 4th Dimension Design, Inc., Third-Party Defendant, R & B Construction, Inc., Third-Party Defendant-Appellant-Petitioner, West Bend Mutual Insurance Company, Intervenor-Respondent.
CourtWisconsin Supreme Court

For the third-party defendant-appellant-petitioner, there were briefs by John E. Machulak and Machulak, Robertson & Sodos, S.C., Milwaukee, and oral argument by John E. Machulak.

For the intervenor-respondent, there was a brief by Jeffrey L. Leavell, Danielle N. Rousset and Jeffrey Leavell, S.C., Racine, and oral argument by Jeffrey L. Leavell.

PER CURIAM.

¶1 On April 6, 2016 we granted R&B Construction, Inc.'s petition for review of an unpublished decision of the Court of Appeals.1 Briefing of the parties and of the amicus, Wisconsin Defense Counsel, Inc., were timely completed, and on October 18, 2016, the court held oral argument.

¶2 The petition for review asked the court to decide: (1) whether a third-party complaint may state a claim for which an insurance company has a duty to defend when the third-party plaintiff was sued for misrepresentation by the first-party plaintiff; (2) whether a third-party defendant may supplement the third-party complaint with additional facts when the third-party defendant seeks a defense from its insurance company; and (3) whether summary judgment denying a claim for defense conclusively concludes the duty to defend question, notwithstanding subsequent developments in the lawsuit.

¶3 The circuit court granted summary judgment to West Bend Mutual Insurance Company.2 The circuit court concluded that there was no initial grant of coverage and also, if there were an initial grant of coverage, the policy exclusions prevented coverage for the claims for which R&B Construction sought defense. Therefore, West Bend Mutual had no duty to defend. The circuit court dismissed West Bend Mutual from the lawsuit and R&B appealed.

¶4 In considering R&B's claim that West Bend Mutual had a duty to defend R&B, the Court of Appeals decided no defense was due based solely on its conclusion that there was no initial grant of coverage for the injury from which a duty to defend could arise.3 However, that was not the only argument that West Bend Mutual made to the Court of Appeals. West Bend Mutual also asserted that if the Court of Appeals concluded that there was an initial grant of coverage, the policy exclusions obviated coverage and therefore, there was no duty to defend.

¶5 The petition for review and the responses presented to us during our review focused on the Court of Appeals decision. Therefore, they were limited to whether there was an initial grant of coverage under the policy. No party argued that if there was an initial grant of coverage, the policy exclusions nevertheless precluded coverage. Therefore, no party challenged the circuit court's conclusion that the policy exclusions precluded coverage, a conclusion that the Court of Appeals' decision left in place because the Court of Appeals did not address policy exclusions.

¶6 In 2016, we decided Water Well Sol. Serv. Group, Inc. v. Consolidated Ins. Co. , 2016 WI 54, 369 Wis.2d 607, 881 N.W.2d 285. One of the questions presented in Water Well was whether a four-corners analysis required interpretation of the entire policy, i.e., whether there was an initial grant of coverage and whether any exclusion or exception affected coverage. Id. ¶2. We concluded that when a claim for defense is made, courts must interpret the entire policy—including any grant of coverage and all applicable exclusions and exceptions to exclusions that bear on coverage. Id. ¶¶2-3 (citing Marks v. Houston Cas. Co. , 2016 WI 53, ¶¶61-76, 369 Wis.2d 547, 881 N.W.2d 309 ).

¶7 In the case now before us, if we were to stop our analysis after determining that there was an initial grant of coverage, the parties would not receive a full four-corners analysis. Our decision could be viewed as retreating from the clear directive we gave in Water Well where we said, "under the four-corners rule the entire policy must be examined, including the coverage-granting clauses, exclusions, and exceptions to any applicable exclusions." Id. ¶2.

¶8 Our decision also would create confusion because the circuit court concluded that the "Your Work" exclusion precluded coverage, and that decision was not overturned by the Court of Appeals. Before us, neither party briefed or argued that coverage was precluded by a policy exclusion. Therefore, were we to follow the lead of the parties and the Court of Appeals and not address exclusions and any applicable exceptions to exclusions, a question would remain about whether West Bend Mutual had a duty to defend R&B because the circuit court concluded that an exclusion precluded coverage under the West Bend policy.

¶9 Accordingly, because there are coverage questions for which no argument or briefing was provided to us and because deciding only whether there is a grant of coverage will cause confusion and provide no answer to the parties on how they are to proceed, we conclude that the petition for review was improvidently decided.

By the Court. —The review of the decision of the court of appeals is dismissed as improvidently granted.

¶10 ANNETTE KINGSLAND ZIEGLER and REBECCA GRASSL BRADLEY, JJ., did not participate.

PATIENCE DRAKE ROGGENSACK, C.J. (concurring).

¶11 Although I agree that the review herein was improvidently granted, I write in concurrence for two reasons: (1) to point out the significant risk parties face in failing to complete a full, four-corners analysis before us, as is required by Water Well Sol. Serv. Group, Inc. v. Consolidated Ins. Co. , 2016 WI 54, ¶2, 369 Wis.2d 607, 881 N.W.2d 285, and (2) to avoid public confusion, which could result from Justice Abrahamson's dissent.

¶12 Unlike the full, four-corners analysis, which the parties completed in both the circuit court and the court of appeals, they presented only a partial analysis here. They addressed only the initial grant of coverage issue. As is apparent from Justice Abrahamson's writing that follows, she would conclude that there was an initial grant of coverage. West Bend Mutual ignored the risk that we could conclude that its policy made an initial grant of coverage when West Bend Mutual limited the issues it presented to us and did not address the policy exclusions. Ms. Smith ignored the risk that the circuit court's conclusion that the "Your Work" exclusion precluded coverage when she chose not to attack that decision as part of her review here. As a cautionary note, a full, four-corners analysis is required, as we explained in Water Well .

¶13 Justice Abrahamson states, "We conclude" that no policy exclusion excuses West Bend's duty to defend. However this conclusion is unsupported by anything other than one sentence found in ¶43 of her writing. In ¶43, she also states, "we reverse the decision of the court of appeals," when the majority of the court does not reverse the decision of the court of appeals. Accordingly, I write to avoid the potential for public confusion that her writing may create.

SHIRLEY S. ABRAHAMSON, J. (dissenting).

¶14 This court seriously errs in dismissing this petition for review as improvidently granted. It errs because the parties and the public need a decision from this court on the important issues the parties presented, briefed, and argued in this court.

¶15 This dismissal embodies regrettable appellate practice given the circumstances of this case and the court's scanty workload.

¶16 This dismissal has unnecessarily caused these parties and the amicus curiae expense and delay without giving the parties, the amicus, or the public the benefit of a decision on important issues.1

¶17 The parties have been awaiting a final appellate decision for more than two years since the circuit court issued its judgment. Obviously, they have incurred substantial expenses. The circuit court entered judgment on November 25, 2014. The court of appeals issued its decision on December 22, 2015. This court granted R&B Construction's petition for review on April 6, 2016. R&B Construction, Inc., West Bend Mutual Insurance Company, and Wisconsin Defense Counsel Inc., as amicus curiae, all filed briefs in this court. This court held oral argument on October 18, 2016.

¶18 The petition for review in the instant case raised the following significant issues:

1. Can a third-party complaint state a claim that an insurance company has a duty to defend, where the complaint against the third-party plaintiff is for misrepresentation?
2. Should a party looking to his insurance company to provide him with a defense be able to introduce information not stated in the pleadings to show that there could be claims requiring his insurer to provide a defense?
3. Can a party denied a defense after his insurance company succeeds on a motion for summary judgment reassert a right to a defense if later developments in the case show that he is entitled to a defense?

¶19 We granted review of these issues because they are law-developing. Resolving the first issue relating to third-party practice would have given this court the opportunity to explain the proper application of the four-corners rule in duty-to-defend cases involving third-party complaints and answers.

¶20 The case also presents yet another important opportunity to educate litigants and ourselves about preserving issues for review in this court. We have missed a good opportunity to once again clarify the rules of appellate practice.

¶21 Furthermore, the court's case load is scanty. We probably will decide fewer than 55 cases from September 2016 through June 2017 (up from fewer than 45 cases from September 2015 through June 2016).

¶22 Here are the circumstances leading to the untoward dismissal in the instant case.

¶23 The...

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    ...that deciding the issues before the court only would "cause confusion and provide no answer to the parties on how they are to proceed." 2017 WI 43, ¶9, 374 Wis. 2d 715, 893 N.W.2d 790. Indeed, in Smith, two separate writings provided further nuanced discussion. See id., ¶¶11-13 (Roggensack,......
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