Southeast Wisconsin v. Mitsubishi
| Decision Date | 03 July 2007 |
| Docket Number | No. 2005AP2017.,2005AP2017. |
| Citation | 738 N.W.2d 87,2007 WI App 185 |
| Parties | SOUTHEAST WISCONSIN PROFESSIONAL BASEBALL PARK DISTRICT, Plaintiff-Respondent, v. MITSUBISHI HEAVY INDUSTRIES AMERICA, INC., HCH Miller Park Joint Venture, Hunt Construction Group f/k/a Huber, Hunt & Nichols, Inc., The Clark Construction Group, Inc. and Hunzinger Construction Company, Defendants-Respondents, Ove Arup & Partners California Limited and Federal Insurance Company, Intervenors-Defendants, Travelers Property Casualty Company of America f/k/a The Travelers Indemnity Company of Illinois, Intervenor-Defendant-Appellant, Federal Insurance Company, Intervenor-Plaintiff-Respondent. |
| Court | Wisconsin Court of Appeals |
Appeal from a judgment of the circuit court for Milwaukee County: Kitty k. Brennan,1 Judge. Affirmed.
On behalf of the intervenor-defendant-appellant Travelers Property Casualty Company of America f/k/a The Travelers Indemnity Company of Illinois, the cause was submitted on the briefs of Brady C. Williamson, Katherine Stadler and Jennifer L. Peterson of LaFollette Godfrey & Kahn, of Madison and Robert C. Johnson (pro hac vice) and William T. Barker of Sonnenschein Nath & Rosenthal LLP of Chicago, Illinois. There was oral argument by Brady C. Williamson.
On behalf of the plaintiff-respondent Southeast Wisconsin Professional Baseball Park District, the cause was submitted on the brief of Susan G. Schellinger of Davis & Kuelthau, S.C. of Milwaukee and John H. Hinderaker of Faegre & Benson LLP of Minneapolis, Minnesota. There was oral argument by John H. Hinderaker.
On behalf of the defendants-respondents HCH Miller Park Joint Venture, Hunt Construction Group, f/k/a Huber, Hunt & Nichols, Inc., The Clark Construction Group, Inc. and Hunzinger Construction Company, the cause was submitted on the brief of Craig W. Nelson of Nelson Connell Conrad Tallmadge & Slein, S.C. of Brookfield, David T. Dekker and Gregg N. Dulik of Thelen Reid & Priest LLP of Washington, D.C. and José M. Pienknagura of The Hunt Corporation of Scottsdale, Arizona. There was oral argument by David T. Dekker.
On behalf of the intervenor-plaintiff-respondent Federal Insurance Company, the cause was submitted on the brief of John A. Busch, Christopher C. Mohrman and Timothy M. Hansen of Michael Best & Friedrich LLP of Milwaukee and Edward B. Ruff III and Michael Clarke (pro hac vice) of Pretzel & Stouffer, Chartered of Chicago, Illinois. There was oral argument by John A. Busch.
On behalf of the defendant-respondent Mitsubishi Heavy Industries America, Inc., the cause was submitted on the briefs of Dean P. Laing and William A. Wiseman of O'Neil, Cannon, Hollman, DeJong S.C. of Milwaukee. There was oral argument by Dean P. Laing.
Before WEDEMEYER, P.J., FINE and KESSLER, JJ.
Travelers Property Casualty Company of America appeals from a judgment finding that it breached its duty to defend Mitsubishi Heavy Industries America, Inc., HCH Miller Park Joint Venture and the Southeast Wisconsin Professional Baseball Park District, as well as the amount of attorney fees and costs for which it was ordered to reimburse Federal Insurance Company, which had paid Mitsubishi's, HCH's and the District's defense fees costs.
¶ 2 The trial court found, and Travelers conceded for the first time at oral argument, that under the terms of its Commercial General Liability policy and endorsements, Travelers had a duty to defend Mitsubishi and HCH against the First Amended Complaint of the District ("Amended Complaint"), which alleged that Mitsubishi and HCH were each negligent and that such conduct caused damage to the completed work on the Miller Park Baseball Stadium. The trial court also found, but Travelers disputes, that Mitsubishi's and HCH's counterclaims against the District were so inextricably intertwined factually with the allegations by the District against Mitsubishi and HCH that Travelers also had a duty to defend the District against those counterclaims. The trial court ruled on three separate occasions that Travelers had the duty to defend. Travelers consistently refused to undertake the duty. Finally, the trial court granted a declaratory judgment that Travelers had breached its duty to defend all three insureds and, because of the breach, was liable for all damages that flowed from the breach and all defense costs incurred by each party, including those costs and fees paid by Federal, from the date of the Amended Complaint.
¶ 3 The trial court rejected Travelers' claim that its obligation should be reduced by the defense costs paid after the date of the Amended Complaint by Federal, an excess carrier, and also rejected Travelers' claim that it was entitled to an additional evidentiary hearing, beyond the hearing already provided by the trial court, on the reasonableness and necessity of the legal fees and costs paid by Federal or incurred by the District, HCH or Mitsubishi. The trial court entered judgment against Travelers. Travelers appealed. We affirm.
¶ 4 Four companies issued five insurance policies covering the Miller Park Baseball Stadium construction. The policies were layered in an Owner Controlled Insurance Program. Because of "layering," if one policy paid its limits then the next policy in line (the next "layer") became responsible. Travelers' policy specifically states that it is the primary policy. The remaining insurers are sequenced layers of excess coverage.2
¶ 5 This layering arrangement continued from the beginning of the stadium construction, in policy year 1996/1997, through completion of construction and the stadium opening on March 30, 2001. Each year, the Travelers' policy was reinstated and the limits of coverage were refreshed.3 Hence, if an occurrence exhausted the limits of Travelers' policy in one policy year, new limits in the same amount would become available in the following policy year for new occurrences. Likewise, if Travelers' liability policy limits were exhausted in one policy year, each excess carrier in sequence would be responsible according to the terms of their policies.
¶ 6 Only Travelers' primary policy and Federal's excess policy are involved in the dispute in this case. Travelers' policy included an extension which covered "property damage" caused by "an occurrence" during the three-year period commencing upon completion of the stadium.
¶ 7 On July 14, 1999, a crane collapsed at the Miller Park construction site, killing three ironworkers. The tort claims that followed resulted in a ninety-four million dollar verdict for the families and estates of the men who died. Before the verdict in the crane collapse case, Travelers paid its two million dollar liability policy limit per occurrence from its 1999/2000 policy, and declined to provide further defense of crane collapse claims, based upon a provision in its policy which allowed it to avoid further defense responsibility when it exhausted its liability limit in settlement.
¶ 8 In January 2002, the District sued Mitsubishi and HCH for damages to property caused by the crane collapse. Mitsubishi and HCH each responded with: (1) affirmative defenses; (2) counterclaims against the District asserting entitlement to extra payments for goods and services not included in the original contract; and (3) cross-claims against each other disputing responsibility for delays and errors. Travelers refused to defend, arguing both that it had exhausted its policy limits on the crane collapse and that there was no coverage under the policy. Federal, as an excess carrier, and under a reservation of rights letter, undertook the defense.4 On March 3, 2003, the trial court held that Travelers' payment of its policy limits in the crane collapse injury case also terminated its duty to defend against crane collapse property damage claims. Travelers' duty to defend Mitsubishi and HCH against crane collapse claims ended because Travelers' policy provided that: "Our ... duty to defend end[s] when we have used up the applicable limit of insurance in the payment of judgments or settlements...." The trial court, when it ruled that Travelers had no duty to defend the crane collapse claims, prophetically observed:
But based upon the four corners [of the complaint], I would agree that Travelers at the juncture that we have here today did not have a duty to defend and that it exhausted its policy coverage as to [the crane collapse] related claims....
....
Now, that being said, I suspect there's going to be an amendment. [Travelers] may very well be back in here under issues of the non-[crane collapse] issues.
(Emphasis added.)
¶ 9 Because of the layering effect of the excess policies, Federal became responsible for defending the crane collapse property damage litigation. Travelers characterizes Federal as thus becoming the "primary insurer"5 because Federal became responsible for the duty to defend. In the context of insurance terms and the policy layering here, that is not correct. See Treder v. LST, Ltd. P'ship, 2004 WI App 75, ¶¶ 14-15, 271 Wis.2d 771, 679 N.W.2d 555 (), review denied, 2004 WI 114, 273 Wis.2d 656, 684 N.W.2d 137; Oelhafen v. Tower Ins. Co., 171 Wis.2d 532, 537-38, 492 N.W.2d 321 (Ct.App.1992) (). Under its policy, Federal was, and remained, an excess carrier. Under its policy, Travelers was, and remained, the primary carrier. However, because Travelers had exhausted its limits for crane collapse claims under its policy,6 Travelers was no longer responsible for the defense of the crane collapse claims. That did not make Federal the "primary" insurer7 in the context of the layering scheme in the Owner Controlled Insurance Program; it only triggered Federal's duty as an excess carrier to defend the crane collapse claims.
¶ 10 Beginning April 1, 2001, as the stadium opened,...
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