Snap-on Tools Corp. v. First State Ins. Co.
| Decision Date | 31 March 1993 |
| Docket Number | SNAP-ON,No. 91-1356,91-1356 |
| Citation | 175 Wis.2d 622,502 N.W.2d 282 |
| Parties | NOTICE: UNPUBLISHED OPINION. RULE 809.23(3), RULES OF CIVIL PROCEDURE, PROVIDE THAT UNPUBLISHED OPINIONS ARE OF NO PRECEDENTIAL VALUE AND MAY NOT BE CITED EXCEPT IN LIMITED INSTANCES. TOOLS CORPORATION, Plaintiff-Appellant-Cross Respondent, v. FIRST STATE INSURANCE CO., Defendant-Respondent-Cross Appellant. |
| Court | Wisconsin Court of Appeals |
Before NETTESHEIM, P.J., and BROWN and ANDERSON, JJ.
ANDERSON.
The dispositive issue before this court is whether the trial court should have granted First State Insurance Co.'s motion for summary judgment on the ground that the intentional infliction of emotional distress is not a covered "occurrence" as that term is defined in a liability insurance policy insuring Snap-on Tools Corporation. We conclude that Snap-on's intentional acts are not specifically included in the listing of intentional torts covered in the liability policy and are therefore excluded from coverage. Accordingly, we reverse the judgment of the circuit court.
Appellant-cross respondent Snap-on Tools is located in Kenosha. It produces and sells tools throughout the country. Respondent-cross appellant First State has its offices in Boston and began to provide excess liability insurance to Snap-on in 1983.
Snap-on's liability insurance program is described as novel. Snap-on and First State negotiated the terms of the excess liability insurance policy with the result being a nonstandard "manuscript" policy. The policy carried a limit of $1,000,000 for any claim. Under the terms of the policy, Snap-on retained the first $100,000 of coverage (retained limits) and First State's limit of liability was $900,000 for any claim.
The "manuscript" policy included detailed provisions that established the rights, duties and obligations of both parties. Snap-on had a duty to notify First State of any claim if the potential loss would exceed Snap-on's retained limits. Section (5), "Notice of Occurrence" of the "Conditions" portion of the policy, provided:
NOTICE OF OCCURRENCE: The Insured shall immediately notify the Company of
(a) any occurrence which, in the Insured's estimate of the value of injuries or damages sought, WITHOUT REGARD TO LIABILITY, might result in a judgment in an amount sufficient to involve the Company's limits of liability hereunder, (b) any occurrence with respect to which the Insured or any claim handling organization has created a loss reserve equal to or greater than fifty (50) percent of the Insured's retained limit hereunder, and (c) any other occurrence which seems likely to involve the insurance afforded hereunder, and (d) any aggregate amount insured (paid or reserved) resulting from all occurrences with respect to which the Insured or any claims handling organization has incurred (paid or reserved) loss amounts equal to or greater than fifty (50) percent of the Insured's retained limit hereunder. Such notice shall contain particulars sufficient to identify the Insured, and also reasonably obtainable information respecting the time, place and circumstances of the occurrence, the names and addresses of the injured and of available witnesses. Failure to give notice of any occurrence which at the time of its happening did not appear to involve this Contract but which, at a later date would appear to give rise to claims hereunder, shall not prejudice such claim.
Under the policy, Snap-on was primarily responsible for the investigation, defense and settlement of claims. First State reserved the rights to associate with Snap-on on the defense of claims, to take over the defense of any claim and to approve any settlement that involved First State's liability. Details of each party's duties were in the "manuscript" policy's section on "Conditions":
ASSISTANCE AND COOPERATION OF THE INSURED: The Company shall not be called upon to assume charge of the defense or settlement of any claims made or suits brought or proceedings instituted against the Insured. The Insured shall be responsible for the investigation and defense of any claim made or suit brought or proceeding instituted against the Insured to which this Contract applies. The Insured shall use diligence, prudence and good faith in the investigation defense and settlement of all such claims and shall not unreasonably refuse to settle any which, in the exercise of sound judgment should be settled, provided, however, that the Insured shall not make or agree to any settlement for any sum which would involve the limits of the Company's liability hereunder without the approval of the Company.
The Company shall have the right and shall be given the opportunity to associate with the Insured in the defense and control of any claim, suit or proceeding which involves or appears reasonably likely to involve the Company and in which event the Insured and the Company shall cooperate in all things in defense of such claim, suit or proceeding.
The Company, if it so elects and at its sole option, shall have the right to assume complete control of any claim which appears likely to involve the Company's limit of liability under this Contract.
Snap-on and First State negotiated the "manuscript" policy's definitions of "occurrence" and "personal injury."
(e) "Occurrence" means an accident, including continuous or repeated exposure to conditions, which results during the term of this Contract in personal injury or property damage neither expected nor intended from the standpoint of the Insured.
(f) "Personal Injury" means (1) bodily injury, sickness, disease, disability or shock which occurs during the term of this Contract, including death at any time resulting therefrom and, if arising out of the foregoing, mental an [sic] and mental injury; (2) false arrest, false imprisonment, wrongful eviction, wrongful entry, wrongful detention or malicious prosecution; (3) libel, slander, defamation of character, humiliation or the invasion of the rights of privacy, unless arising out of advertising, broadcasting or telecasting activities; (4) assault and battery by an employee or agent of the Named Insurance, provided that the Named Insured is held legally liable therefore and that the assault and battery was not committed by or at the direction of the Named Insured, except when committed for the purpose of protecting life or property owned by or otherwise in the care, custody or control of the Named Insured; (5) discrimination not committed by or at the direction of the Insured.
Snap-on sells its tools through franchise dealers who service specific territories. In 1985, George Owens, a Snap-on dealer in California, sued Snap-on for the alleged wrongful termination of his dealership contract. Owens alleged fraud, breach of good faith, breach of contract, intentional infliction of emotional distress, duress, unfair business practices and interference with contractual relations. He sought injunctive and declaratory relief as well as reformation of the contract. Owens also sought compensatory damages in excess of $120,000 and unspecified punitive damages.
Under the terms of the policy, Snap-on proceeded with the investigation and defense of the lawsuit. Snap-on's in-house counsel assessed Snap-on's liability exposure at $7000 in compensatory damages and punitive damages in the $40,000-$60,000 range. Because this estimate of liability did not exceed Snap-on's retained limit of $100,000, Snap-on did not notify First State of Owens' lawsuit. After Owens completed his case-in-chief, Snap-on's California trial counsel informed Snap-on that its liability exposure could exceed $100,000; still, Snap-on did not notify First State of the ongoing litigation.
A California jury returned a verdict finding that Snap-on breached its covenant of good faith and fair dealing, intentionally inflicted emotional distress, intentionally interfered with business relations and breached the dealership contract. The jury awarded Owens compensatory damages of $7000 for breach of contract and $275,554 for the breach of the covenant of good faith and fair dealing, interference with business relations and intentional infliction of emotional distress. The jury also awarded $6,567,000 in punitive damages for intentional infliction of emotional distress; the California trial court later reduced the punitive damages award to $4,000,000.
Snap-on notified First State of the claim and the verdict within one week. First State did not set a loss reserve for this claim because it believed that punitive damages were not insurable under California law. First State immediately informed Snap-on that there would be no coverage for punitive damages. First State also retained California counsel to help investigate the claim.
While this investigation was proceeding, Snap-on settled Owens' lawsuit. The settlement allocated $1,000,000 in punitive damages, $25,000 for breach of contract and $275,000 for intentional infliction of emotional distress. Snap-on did not obtain First State's approval of the settlement and did not inform First State of the settlement for several weeks.
Nine months after Snap-on reported Owens' verdict, First State issued an initial determination denying the claim. First State's opinion was that: California law barred coverage for punitive damages; the policy did not cover damages caused by breach of the dealership contract; Snap-on did not provide timely notice of the claim; and Snap-on did not obtain First State's approval before settling the claim.
First State issued its final determination denying Snap-on's claim almost one year after notice of Owens' verdict was filed. First State premised the denial of coverage on its conclusions that Owens' claim was not a covered "occurrence" as defined in the policy, Snap-on's notice was untimely, and Snap-on failed to obtain First State's approval for the...
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