Smith v. Katz, No. 96-1998

CourtUnited States State Supreme Court of Wisconsin
Citation226 Wis.2d 798,595 N.W.2d 345
Decision Date22 June 1999
PartiesJay 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-AppellantPetitioner, David A. and Mary A. Stawski, Third-Party Defendants.
Docket NumberNo. 96-1998

Page 345

595 N.W.2d 345
226 Wis.2d 798
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-AppellantPetitioner,
David A. and Mary A. Stawski, Third-Party Defendants.
No. 96-1998.
Supreme Court of Wisconsin.
Argued Jan. 6, 1999.
Decided June 22, 1999.

Page 347

For the defendant-third-party plaintiff-appellant-petitioner there were letter 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 letter brief by Michael R. Vescio and Jeffrey Leavell, S.C., Racine and oral argument by Jeffrey L. Leavell.

¶1 DAVID T. PROSSER, J.

This case is before the court because we granted Philip A. Giuffre's (Giuffre) motion for reconsideration of our decision in Smith v. Katz, 218 Wis.2d 442, 578 N.W.2d 202 (1998). In the earlier decision, we affirmed an unpublished decision of the court of appeals 1 on grounds that Giuffre's insurance policy in the record did not cover the period in which alleged property damage occurred. When the record was amended to include a policy covering a later period, we granted Giuffre's motion for reconsideration.

¶2 The ultimate issue before the court is whether West Bend Mutual Insurance Company (West Bend) has a duty under the policies to defend and indemnify Giuffre for the claims made by Jay and Debra Smith (Smiths). We conclude that the claims against Giuffre in the Smiths' amended complaint do not constitute claims for property damage caused by an occurrence under the language of the West Bend policies and thus affirm the decision of the court of appeals.

FACTS

¶3 For purposes of this review, the facts are not in dispute. The Smiths purchased a vacant lot in Greenfield, Wisconsin, on July 19, 1991, from Giuffre for $29,000.00. In March of 1993, the Smiths hired Paul Katz d/b/a Underroof Building & Design (Katz) to construct a house on the lot. In preparing for construction, Katz excavated some soil and discovered underground springs. When Katz began to construct the foundation for the house, the foundation hole filled with water, causing the concrete foundation to collapse three or four times during construction. Eventually, the house was completed after delay and extra cost. The Smiths later complained during discovery that the pressure from ground water was pushing in and cracking the foundation walls and that there was cracking inside the house.

PROCEDURAL HISTORY

¶4 The Smiths filed an action in Milwaukee County Circuit Court on April 19, 1995. The original complaint made four claims against Giuffre: (1) breach of warranty, (2) intentional misrepresentation, (3) strict responsibility misrepresentation, and (4) negligent misrepresentation. The complaint was later amended to include two additional defendants and three additional

Page 348

claims against them. 2 However, the claims against Giuffre were not amended.

¶5 On January 23, 1996, West Bend filed a motion to intervene, asserting that the allegations of the Smiths' complaint did not describe covered occurrences or damages that would trigger its duty to defend or indemnify Giuffre. West Bend thereafter sought a declaratory judgment that it had no duty to defend or indemnify under the policy.

¶6 On March 5, 1996, West Bend moved for summary judgment. First, West Bend argued that the Smiths' claims for damages were strictly pecuniary and economic in nature. The West Bend policy 3 defined "property damage" to mean "physical injury to tangible property, including all resulting loss of use of that property" or "loss of use of tangible property that is not physically injured." West Bend declared that the alleged pecuniary and economic damages were not "property damage" under the plain language of the policy.

¶7 Second, West Bend argued that there was no "occurrence" under the plain language of the policy. Under West Bend's policy, " '[o]ccurrence' means an accident, including continuous or repeated exposure to substantially the same general harmful conditions." West Bend asserted that misrepresentations made by a seller concerning the condition of property to be sold do not constitute an "occurrence" under Wisconsin law.

¶8 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.

¶9 Finally, West Bend argued that even if property damage had been alleged under the policy, the "premises you sell" exclusion clause excluded coverage. The policy excluded coverage for " '[p]roperty damage' to ... [p]remises you sell ... if the 'property damage' arises out of any part of those premises...." According to West Bend, the alleged damages arose from premises sold to the Smiths by Giuffre and thus the allegations were not covered under the plain language of the policy.

¶10 Giuffre countered that the court must look beyond the four corners of the Smiths' complaint because the complaint was ambiguous and evidence brought out in discovery showed that the Smiths were alleging physical injury to tangible property. In addition, Giuffre asserted that the property damage was caused by abnormally high ground water, a preexisting condition which was an "occurrence" under the policy.

¶11 A hearing on West Bend's motion for summary judgment was held on March 28, 1996. The circuit court, Jacqueline D. Schellinger, Judge, granted West Bend's motion. The court determined that based on the plain language of the policy there was no coverage or duty to defend against an intentional act. The court also concluded that the language in the policy excluding coverage for "[p]remises you sell, if the property damage arises out of any part of those premises," applied because the alleged property damage "arose out of [the] premises. The part of [the] premises being the ground water."

Page 349

¶12 Giuffre moved the circuit court to reconsider its decision. When the court denied the motion, Giuffre appealed.

¶13 In a per curiam opinion, the court of appeals affirmed the circuit court. Relying solely on the "premises you sell" exclusion, the court of appeals concluded there was no coverage under the policy. The court stated that "the damage to the home resulted from the ground water seeping or pressing against the Smiths' basement walls. This ground water was a part of the land that Giuffre sold to the Smiths. Therefore, the property damage to the Smiths' home arose out of 'any part of the premises sold.' " Katz, at 204.

¶14 This court granted Giuffre's petition for review. After hearing oral argument on April 7, 1998, we determined that the damage the Smiths complained of occurred sometime after March 23, 1993, but that the only insurance policy in the record provided coverage from September 1990 through September 1991. Katz, 218 Wis.2d at 444, 578 N.W.2d 202. Accordingly, we remanded the case to the circuit court to determine whether Giuffre had another West Bend insurance policy for the period in question in 1993.

¶15 Giuffre then filed a motion with this court to amend the record to include a West Bend insurance policy in effect from September 12, 1992, through September 12, 1993. This court granted the motion and amended the record. We also granted Giuffre's motion for reconsideration which asked this court to decide the coverage issue now that we had proof of an effective policy at the time the damage occurred. As a result, we must determine whether West Bend has a duty to defend and indemnify Giuffre under the policies now in the record for the claims filed by the Smiths.

STANDARD OF REVIEW

¶16 In this case, we review a decision of the circuit court granting West Bend's motion for summary judgment. We review summary judgment rulings de novo, Burkes v. Klauser, 185 Wis.2d 308, 327, 517 N.W.2d 503 (1994), applying the same methodology set out in Wis. Stat. § 802.08(2) as applied by the circuit court. Green Spring Farms v. Kersten, 136 Wis.2d 304, 315, 401 N.W.2d 816 (1987). Under § 802.08(2), a motion for summary judgment must be granted when there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. 4

¶17 In addition, we are called upon to interpret an insurance contract. Interpretation of an insurance contract is a question of law which this court reviews de novo. Lambert v. Wrensch, 135 Wis.2d 105, 115, 399 N.W.2d 369 (1987); Katze v. Randolph & Scott Mut. Fire Ins. Co., 116 Wis.2d 206, 212, 341 N.W.2d 689 (1984).

ANALYSIS

¶18 When the court granted Giuffre's petition for review, we expected this case to present an opportunity to analyze and interpret the "premises you sell" exclusion clause in standard form commercial general liability insurance policies sold in Wisconsin. Both the circuit court and the court of appeals relied upon the "premises you sell" clause in awarding summary judgment to Giuffre's insurer. Upon close examination, however, we are convinced that Giuffre does not have coverage under his policies. Consequently, it is unnecessary and inappropriate to interpret the exclusion clause in circumstances where coverage does not exist.

Page 350

¶19 An insurance agreement functions as a contract between the insured and the insurer. City of Edgerton v. General Cas. Co. of Wis., 184 Wis.2d 750, 764, 517 N.W.2d 463 (1994). Therefore, "[i]nterpretation of insurance policies is governed by the same rules of construction that apply to other contracts." Donaldson v. Urban Land Interests, Inc., 211 Wis.2d 224, 230, 564 N.W.2d 728 (1997).

¶20 An insurer's duty to defend its insured is determined by comparing the allegations of the complaint to the terms of the insurance policy. School Dist. of Shorewood v....

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63 practice notes
  • Stuart v. Weisflog's Showroom Gallery, No. 2005AP1287.
    • United States
    • United States State Supreme Court of Wisconsin
    • July 10, 2008
    ...with the cost to remedy the property damage to their home. ¶ 53 In support, American Family cites several cases, including Smith v. Katz, 226 Wis.2d 798, 816-17, 595 N.W.2d 345 (1999); Benjamin v. Dohm, 189 Wis.2d 352, 360-61, 525 N.W.2d 371 (Ct.App.1994); and Qualman v. Bruckmoser, 163 Wis......
  • Smith v. Anderson, No. 2015AP79
    • United States
    • United States State Supreme Court of Wisconsin
    • April 27, 2017
    ...address R&B Construction's argument asserting that the court should carve out an exception to the four-corners rule.27 Smith v. Katz , 226 Wis.2d 798, 807, 595 N.W.2d 345 (1999).28 Olson v. Farrar , 2012 WI 3, ¶30, 338 Wis.2d 215, 229, 809 N.W.2d 1.29 Olson , 338 Wis.2d 215, ¶22, 809 N.W.2d......
  • Schinner v. Gundrum, No. 2011AP564.
    • United States
    • United States State Supreme Court of Wisconsin
    • July 12, 2013
    ...See, e.g., Estate of Sustache, 311 Wis.2d 548, ¶ 52, 751 N.W.2d 845;Am. Girl, 268 Wis.2d 16, ¶¶ 37–49, 673 N.W.2d 65;Smith v. Katz, 226 Wis.2d 798, 819–21, 595 N.W.2d 345 (1999); Bruner v. Heritage Cos., 225 Wis.2d 728, 737–38, 593 N.W.2d 814 (Ct.App.1999); Kalchthaler v. Keller Constr. Co.......
  • Estate of Sustache v. American Family, No. 2006AP939.
    • United States
    • United States State Supreme Court of Wisconsin
    • July 10, 2008
    ...four-corners rule, and this court's subsequent decisions in Doyle v. Engelke, 219 Wis.2d 277, 580 N.W.2d 245 (1998), and Smith v. Katz, 226 Wis.2d 798, 595 N.W.2d 345 (1999). Estate of Sustache, 303 Wis.2d 714, ¶¶ 15-16, 735 N.W.2d 186. The court of appeals concluded that this court's opini......
  • Request a trial to view additional results
63 cases
  • Stuart v. Weisflog's Showroom Gallery, No. 2005AP1287.
    • United States
    • United States State Supreme Court of Wisconsin
    • July 10, 2008
    ...with the cost to remedy the property damage to their home. ¶ 53 In support, American Family cites several cases, including Smith v. Katz, 226 Wis.2d 798, 816-17, 595 N.W.2d 345 (1999); Benjamin v. Dohm, 189 Wis.2d 352, 360-61, 525 N.W.2d 371 (Ct.App.1994); and Qualman v. Bruckmoser, 163 Wis......
  • Smith v. Anderson, No. 2015AP79
    • United States
    • United States State Supreme Court of Wisconsin
    • April 27, 2017
    ...address R&B Construction's argument asserting that the court should carve out an exception to the four-corners rule.27 Smith v. Katz , 226 Wis.2d 798, 807, 595 N.W.2d 345 (1999).28 Olson v. Farrar , 2012 WI 3, ¶30, 338 Wis.2d 215, 229, 809 N.W.2d 1.29 Olson , 338 Wis.2d 215, ¶22, 809 N.W.2d......
  • Schinner v. Gundrum, No. 2011AP564.
    • United States
    • United States State Supreme Court of Wisconsin
    • July 12, 2013
    ...See, e.g., Estate of Sustache, 311 Wis.2d 548, ¶ 52, 751 N.W.2d 845;Am. Girl, 268 Wis.2d 16, ¶¶ 37–49, 673 N.W.2d 65;Smith v. Katz, 226 Wis.2d 798, 819–21, 595 N.W.2d 345 (1999); Bruner v. Heritage Cos., 225 Wis.2d 728, 737–38, 593 N.W.2d 814 (Ct.App.1999); Kalchthaler v. Keller Constr. Co.......
  • Estate of Sustache v. American Family, No. 2006AP939.
    • United States
    • United States State Supreme Court of Wisconsin
    • July 10, 2008
    ...four-corners rule, and this court's subsequent decisions in Doyle v. Engelke, 219 Wis.2d 277, 580 N.W.2d 245 (1998), and Smith v. Katz, 226 Wis.2d 798, 595 N.W.2d 345 (1999). Estate of Sustache, 303 Wis.2d 714, ¶¶ 15-16, 735 N.W.2d 186. The court of appeals concluded that this court's opini......
  • Request a trial to view additional results

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