Smith v. Katz, 96-1998

• Decision Date: 02 June 1998
• Docket Number: No. 96-1998,96-1998
• Parties: Jay W. SMITH and Debra J. Smith, Plaintiffs, West Bend Mutual Insurance Company, Intervenor-Plaintiff-Respondent, v. Paul KATZ, d/b/a Underroof Building and Design and Robert L. Reisinger, Jr., Defendants, Philip A. Giuffre, Defendant-Third-Party Plaintiff-Appellant- Petitioner, David A. and Mary A. Stawski, Third-Party Defendants.
• Court: Wisconsin Supreme Court

Page 202

578 N.W.2d 202

218 Wis.2d 442

Jay W. SMITH and Debra J. Smith, Plaintiffs, West Bend Mutual Insurance Company, Intervenor-Plaintiff-Respondent, v. Paul KATZ, d/b/a Underroof Building and Design and Robert L.

Reisinger, Jr., Defendants,

Philip A. Giuffre, Defendant-Third-Party

Plaintiff-Appellant- Petitioner,

David A. and Mary A. Stawski, Third-Party Defendants.

No. 96-1998.

Supreme Court of Wisconsin.

Argued April 7, 1998.

Decided June 2, 1998.

For the defendant-third party plaintiff-appellant-petitioner there were briefs by Kent A. Tess-Mattner and Schmidt & Rupke, S.C., Brookfield and oral argument by Kent A. Tess-Mattner.

For the intervenor-plaintiff-respondent there was a brief by Jeffrey Leavell, Gregory Boe, and Jeffrey Leavel, S.C., Racine and oral argument by Jeffrey Leavell.

¶1 N. PATRICK CROOKS, Justice

This case is on review from an unpublished decision of the court of appeals. ¹ The court of appeals affirmed the judgment of the Milwaukee County Circuit Court, Jacqueline Schellinger, Circuit Judge, granting West Bend Mutual Insurance Company's (West Bend) motion for summary judgment and dismissing West Bend from the action. The circuit court concluded that two exclusions in West Bend's policy of insurance applied to this case and, therefore, West Bend had no duty to defend and indemnify its insured, defendant Philip A. Giuffre (Giuffre). The court of appeals affirmed the judgment of the circuit court, and Giuffre petitioned this court for review.

¶2 Upon review, we exercise our discretion to decide whether the alleged property damage in this case occurred during the period for which the insurance policy in the record provides coverage. We conclude that because the alleged property damage took place at some point after March 23, 1993, and the insurance policy provisions state that coverage for property damage ended on September 12, 1991, West Bend has no duty to defend and indemnify Giuffre on the claims filed by Jay and Debra Smith. We affirm the court of appeals' decision for that reason, but remand to the circuit court for a determination of whether another West Bend insurance policy exists which requires West Bend to defend and indemnify Giuffre.

A.

¶3 The facts are not in dispute for purposes of our review. The underlying claim involves Giuffre's sale of a vacant lot in Greenfield, Wisconsin, to Jay and Debra Smith (Smiths) on July 19, 1991. Approximately two years after the Smiths purchased the lot from Giuffre, the Smiths hired Paul Katz d/b/a Underroof Building and Design (Katz) to construct a home on the lot. In preparation for the laying of the foundation, Katz excavated some soil and discovered underground springs. Consequently, when Katz began construction, the foundation hole filled with water. The underground springs allegedly caused the concrete foundation to collapse three or four times during construction.

¶4 On April 19, 1995, the Smiths filed an action in Milwaukee County Circuit Court against Giuffre stating four claims. Specifically, the Smiths asserted breach of warranty, intentional misrepresentation, strict responsibility misrepresentation, and negligent misrepresentation. ²

¶5 On January 23, 1996, West Bend filed an intervening complaint as Giuffre's insurer under a business insurance policy issued for the period September 12, 1990, through September 12, 1991. In its complaint, West Bend asserted that the language of the insurance policy at issue did not provide a duty to defend and indemnify Giuffre against the Smiths' claims. Accordingly, West Bend sought a declaratory judgment to that effect.

¶6 On March 5, 1996, West Bend filed a motion for summary judgment. West Bend cited the language of the insurance policy, which states that the policy provides coverage to Giuffre for "property damage" caused by an "occurrence." Under the terms of West Bend's policy, "property damage" is defined as:

Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or

Loss of use of tangible property that is not physically injured. All such loss shall be deemed to occur at the time of the "occurrence" that caused it.

"Occurrence" is defined in West Bend's insurance policy as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."

¶7 West Bend made several arguments that it had no duty to defend and indemnify Giuffre under the terms of the policy. First, West Bend argued that because the Smiths' complaint alleged strictly pecuniary or economic damages, there was no allegation of "property damage" for which the policy would provide coverage. Second, West Bend argued that any alleged misrepresentations by Giuffre did not constitute an "occurrence" for which the policy would provide coverage because the misrepresentations were not an "accident." Third, West Bend argued that the policy did not provide coverage regarding the claim of intentional misrepresentation because the policy specifically excludes coverage for property damage "expected or intended" by the insured. Fourth, West Bend argued that it had no duty to defend and indemnify Giuffre under a "premises you sell" exclusion contained in the policy. Specifically, that provision excludes coverage for " 'property damage' to ... [p]remises you sell ... if that 'property damage' arises out of any part of those premises." West Bend argued that because the alleged damage arose from underground springs throughout the vacant lot, the damage arose from premises sold by Giuffre, which the policy does not cover.

¶8 A hearing on West Bend's motion for summary judgment was held on March 28, 1996. The circuit court granted West Bend's motion based upon the coverage exclusions listed in the insurance policy. The circuit court first concluded that the policy exclusion for property damage "expected or intended from the standpoint of the insured" excluded coverage regarding the Smiths' intentional misrepresentation claim. The circuit court further concluded that the exclusion regarding "premises you sell" was applicable because the alleged property damage to the foundation "arose out of [the] premises. The part of [the] premises being the ground water." Accordingly, the circuit court dismissed West Bend from the action. Giuffre's motion for reconsideration was denied on July 15, 1996, and he appealed.

¶9 The court of appeals affirmed the circuit court's grant of West Bend's motion for summary judgment and dismissal of West Bend from the action. The court of appeals did not specifically consider whether West Bend had a duty to defend and indemnify Giuffre under the coverage provisions of the insurance policy. Rather, the court of appeals addressed the exclusions to the coverage provisions, and concluded that the "premises you sell" exclusion in the policy would negate any duty of West Bend to defend and indemnify Giuffre. The court determined that because the damage allegedly resulted from ground water--which was part of the land Giuffre sold to the Smiths--the property damage arose out of "any part of the premises sold."

B.

¶10 This case involves our review of the grant of a motion for summary judgment. We review a motion for summary judgment de novo, using the same methodology as that employed by the circuit court. See Shannon v. Shannon, 150 Wis.2d 434, 441, 442 N.W.2d 25 (1989). Summary judgment motions are governed by Wis. Stat. § 802.08. Under § 802.08(2), a motion for summary judgment will be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." With regard to the motion for summary judgment in this case, we must consider whether West Bend has a duty to defend and indemnify Giuffre under the terms of its insurance policy. ³ The interpretation of language in an insurance policy is a question of law which we review de novo. See Lambert v. Wrensch, 135 Wis.2d 105, 115, 399 N.W.2d 369 (1987). Although we review questions of law de novo, we benefit from the analyses of the circuit court and the court of appeals. See Aiello v. Village of Pleasant Prairie, 206 Wis.2d 68, 70, 556 N.W.2d 697 (1996).

¶11 West Bend makes several arguments that the insurance policy language does not provide coverage for Giuffre for the property damage alleged by the Smiths. West Bend reiterates the arguments made to the circuit court and the court of appeals that the Smiths' claimed damages are not "property damage"; that even if there is property damage, it was not caused by an "occurrence"; and that even if there is property damage caused by an occurrence, there are policy exclusions that negate West Bend's duty to defend and indemnify Giuffre. In addition, West Bend now argues that the insurance policy at issue in this case does not provide coverage because the alleged property damage did not occur within the policy period. West Bend did not make this argument to the circuit court or the court of appeals, but raises the issue for the first time to this court.

¶12 We will generally not consider issues raised for the first time on appeal. See State v. Holland Plastics Co., 111 Wis.2d 497, 504, 331 N.W.2d 320 (1983). However, this court may exercise its discretion to reach issues first raised on appeal. In deciding whether to exercise our discretion, we must consider "the facts and circumstances disclosed by the particular record" in a given case. State ex rel. General Motors Corp. v. City of Oak Creek, 49 Wis.2d 299, 319, 182 N.W.2d 481 (1971).

¶13 In this case, the policy at issue was filed with the original pleadings presented to the circuit court. This policy was also available to the court of appeals and is part of the record before this court. Both...