Smith v. State Farm Fire and Cas. Co.

Decision Date28 October 1985
Docket NumberNo. 85-1218,85-1218
Citation380 N.W.2d 372,127 Wis.2d 298
PartiesJames W. SMITH and Thomas D. White, Plaintiffs-Respondents, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant-Appellant.
CourtWisconsin Court of Appeals

Michael E. Ehrsam and Moen, Sheehan, Meyer & Henke, Ltd., La Crosse, for defendant-appellant.

Jeffrey D. Knickmeier, DeSoto, for plaintiffs-respondents.

Before GARTZKE, P.J., and DYKMAN and EICH, JJ.

EICH, Judge.

State Farm Fire and Casualty Company appeals from an order denying its motion for summary judgment. Respondents James Smith and Thomas White were sued in Iowa by a third party for their role in a real estate transaction. The issue is whether State Farm, respondents' insurer, had a duty to defend them in the Iowa action under the terms of a commercial umbrella policy.

We conclude: (1) that State Farm's duty to defend is determined by the nature of the claim stated in the Iowa complaint, despite the availability of later depositions and other discovery materials in the action; and (2) that the acts alleged in the complaint--intentional infliction of emotional distress and fraudulent breach of contract--do not constitute an "occurrence" within the meaning of the coverage provisions of the policy. It follows that State Farm's motion for summary judgment should have been granted, and we therefore reverse.

Summary judgment is appropriate where there are no issues of material fact and the moving party is entitled to judgment as a matter of law. In re Cherokee Park Plat, 113 Wis.2d 112, 115-16, 334 N.W.2d 580, 582-83 (Ct.App.1983).

Both parties moved for summary judgment. Such a motion carries with it "the explicit assertion that the movant is satisfied that the facts are undisputed and that on those facts he is entitled to judgment as a matter of law." Powalka v. State Mut. Life Assurance Co., 53 Wis.2d 513, 518, 192 N.W.2d 852, 854 (1972). Despite the bilateral motions, the trial court concluded that there was an unresolved question of fact. By its terms, State Farm's umbrella policy comes into play only when the underlying liability policy does not provide coverage for the loss. The trial court stated that it could not determine "the basic question of whether a defense was owed" because "the pleadings [did] not address the issue of the underlying insurance." The court considered this to be an unresolved issue of fact and denied both motions without reaching the merits.

The pleadings indicate, however, that respondent's cause of action is based solely on the umbrella policy, and State Farm agrees that coverage under the umbrella policy is the only issue in the case. Moreover, "the practical effect of the bilateral summary judgment motions [is] the equivalent of a stipulation as to the facts." Wiegand v. Gissal, 28 Wis.2d 488, 495a-95b, 137 N.W.2d 412 (1965), 138 N.W.2d 740, 741 (1966) (per curiam opinion on rehearing); Powalka, 53 Wis.2d at 518, 192 N.W.2d at 854.

In summary judgment cases, we follow the same analysis as the trial court. 1 We have examined the pleadings; the complaint states a claim for recovery under the umbrella policy and State Farm's answer joins the issue. The affidavits of both parties indicate that respondents have a prima facie claim and that State Farm has a prima facie defense. All material facts having been stipulated, we proceed to decide the legal issues. 2

The allegations of the complaint determine whether a third-party action comes within the policy coverage so as to create a duty to defend on the part of the insurer. Grieb v. Citizens Casualty Co., 33 Wis.2d 552, 557-58, 148 N.W.2d 103, 106 (1967). "It is the nature of the claim alleged against the insured which is controlling even though the suit may be groundless, false or fraudulent." Id. at 558, 148 N.W.2d at 106.

Respondents argue, however, that we must go beyond the pleadings in the Iowa case to determine State Farm's duty to defend. The case has now been settled, and respondents contend that we must look to depositions and other discovery materials, and to the terms of the settlement agreement itself, rather than limit our inquiry to the allegations of the complaint. Grieb, they assert, is inapplicable to such a situation, citing Pachucki v. Republic Insurance Co., 89 Wis.2d 703, 278 N.W.2d 898 (1979). Pachucki does not discuss Grieb, and the case is readily distinguishable. There, the trial was bifurcated; the question of coverage was tried to the court, presumably because there were questions of fact whose resolution was essential to the determination. Where, as here, there is no factual dispute, questions of insurance coverage are customarily decided on motions for summary judgment. Caraway v. Leathers, 58 Wis.2d 321, 328, 206 N.W.2d 193, 197 (1973). Indeed, when the facts are not in dispute and the legal issues are capable of resolution, summary judgment is mandatory. Sec. 802.08, Stats; Wright v. Hasley, 86 Wis.2d 572, 577-78, 273 N.W.2d 319, 322 (1979).

In this case, respondents, perhaps for tactical reasons, did not challenge State Farm's rejection of the tendered defense and elected not to litigate the issue of coverage in the Iowa action. Instead, they undertook to try only the issues of liability and damages and eventually reached a settlement. The rule of Grieb has been consistently followed in Wisconsin. See, e.g., Sola Basic Ind. v. U.S. Fidelity & Guaranty Co., 90 Wis.2d 641, 646, 280 N.W.2d 211, 213-14 (1979); Gerrard Realty Corp. v. American States Ins. Co., 89 Wis.2d 130, 141, 277 N.W.2d 863, 869 (1979). We adhere to it in this case and reject respondents' argument.

State Farm's umbrella policy provides coverage "for ... loss ... which the Insured shall become legally obligated to pay as damages because of personal injury or property damage or advertising injury to which this policy applies, caused by an occurrence" (emphasis added). State Farm concedes that the incident for which respondents claim coverage resulted in "personal injury" to the Iowa plaintiff within the meaning of the quoted clause. The question is whether the events giving rise to the Iowa action constituted an "occurrence."

The term is defined in the policy as follows: "Occurrence--means an accident, including injurious exposure to conditions, which results, during the policy period, in personal injury ... neither expected nor intended from the standpoint of the Insured." The purpose of using the word "occurrence" in such clauses is to permit consideration of the state of mind of the actor as it relates to the resultant damage, rather than only as it relates to causation. Patrick v. Head of Lakes Cooperative Elec. Ass'n, 98 Wis.2d 66, 69, 295 N.W.2d 205, 207 (Ct.App.1980). Its use affords coverage for an intended...

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