Strauss v. Chubb Indem. Ins. Co.

• Decision Date: 18 November 2014
• Docket Number: No. 13–2580.,13–2580.
• Citation: 771 F.3d 1026
• Parties: Randal STRAUSS and Diane Strauss, Plaintiffs–Appellees, v. CHUBB INDEMNITY INSURANCE COMPANY, Vigilant Insurance Company, Federal Insurance Company, and Great Northern Insurance Company, Defendants–Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

771 F.3d 1026

Randal STRAUSS and Diane Strauss, Plaintiffs–Appellees

v.CHUBB INDEMNITY INSURANCE COMPANY, Vigilant Insurance Company, Federal Insurance Company, and Great Northern Insurance Company, Defendants–Appellants.

No. 13–2580.

United States Court of Appeals, Seventh Circuit.

Argued Feb. 10, 2014.

Decided Nov. 18, 2014.

Rehearing and Rehearing En Banc Denied Jan. 15, 2015.^*

Andrea L. Murdock, Attorney, Halloin & Murdock, S.C., Milwaukee, WI, for Plaintiffs–Appellees.

Todd S. Schenk, Attorney, Tressler LLP, Chicago, IL, Frederick J. Strampe, Attorney, Borgelt, Powell, Peterson & Frauen, Milwaukee, WI, for Defendants–Appellants.

Before HAMILTON, Circuit Judge, and KENDALL, District Judge.¹

Opinion

KENDALL, District Judge.

Randal and Diane Strauss constructed a home in Mequon, Wisconsin in 1994. The Strausses insured the home with a number of policies (collectively, “the Policy”) issued by Chubb Indemnity Insurance Company, Vigilant Insurance Company, Federal Insurance Company, and Great Northern Insurance Company (collectively, “the Chubb Defendants”) from October 1994 to October 2005. Water infiltrated and damaged the home through a defect present since the completion of construction; however, the damage went undiscovered until 2010, well after the Policy expired. When the Strausses submitted a claim to the Chubb Defendants seeking recovery for the damage, they refused coverage, contending that because the damage manifested in 2010 and the “manifestation” trigger applies to first-party property insurance, it could not be responsible for the damage. The Chubb Defendants additionally asserted that the claim was submitted well beyond the applicable statute of limitations. See Wis. Stat. § 631.83(1)(a). The Strausses subsequently brought this action. The district court concluded that the “continuous” trigger theory applied due to the language of the Policy such that coverage existed for the entire loss. Because the continuous trigger theory applied, the district court found that the claims were not time-barred. The Chubb Defendants now appeal, arguing that (1) the manifestation trigger theory applies to first-party property insurance policies universally and (2) the Strausses' suit was not timely filed. For the following reasons, we affirm.

I. Background

The Strausses built their home in Mequon, Wisconsin in 1994. To insure the home, they purchased a “Chubb Masterpiece Deluxe Home Coverage” first-party property insurance policy. The Policy was issued by the Chubb Defendants over the years, from the time of construction in October 1994 through October 2005.²

From 2005 onward, the Strausses obtained insurance coverage for the home from other providers.

The Policy states that coverage is limited “only to occurrences that take place while this policy is in effect.” “Occurrence” is defined as “a loss or accident to which this insurance applies occurring within the policy period. Continuous or repeated exposure to substantially the same general conditions unless excluded is considered to be one occurrence.” Under the Policy taken out by the Strausses, a “ ‘covered loss' includes all risk of physical loss to [the] house or other property ... unless stated otherwise or an exclusion applies.” In addition, the Policy includes a “Legal Action Against Us” clause, mandating that any action against the Chubb Defendants be brought “within one year after a loss occurs.”

In October 2010, the Strausses discovered that water infiltration had been causing damage within the building envelope of the home. The infiltration was ongoing and progressive in nature, beginning around the time of original construction and continuously occurring with each subsequent rainfall. On December 22, 2010, the Strausses submitted a claim to the Chubb Defendants for the discovered damage. The Chubb Defendants denied coverage, relying on two bases: (1) the damage was not discovered during any of their policy periods; and (2) any legal action was time-barred pursuant to both the applicable Wisconsin Statute of Limitations, see Wis. Stat. § 631.83(1)(a), and the “Legal Action Against Us” clause found in the Policy.

The Strausses filed suit in federal court on October 19, 2011, within one year of their discovery of the damage caused by the water infiltration. The parties cross-moved for summary judgment. The district court initially denied both motions, finding factual issues regarding the language of the Policy. Upon reassignment to the Magistrate Judge and after clarification of the language within the Policy, the parties sought reconsideration of their motions for summary judgment. On February 13, 2013, the district court concluded that the “continuous” trigger theory applied to the “occurrence based” Policy at issue because the Policy provided coverage for ongoing losses. Because the “continuous” trigger theory applied, the district court additionally found that the Strausses' claim was not time-barred. Accordingly, the Chubb Defendants were deemed liable for the damage. Upon this determination of liability, the parties stipulated to damages while reserving any appellate rights. This timely appeal followed.

II. Discussion

We review the district court's interpretation of the insurance policy, as well as its grant or denial of a summary judgment motion, de novo. Nautilus Ins. Co. v. Bd. of Dirs. of Regal Lofts Condo. Ass'n, 764 F.3d 726, 730 (7th Cir.2014) ; Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 723 (7th Cir.2011). Likewise, determinations of law in applying a statute of limitations are reviewed de novo. See KDC Foods, Inc. v. Gray, Plant, Mooty, Mooty & Bennett, P.A., 763 F.3d 743, 749 (7th Cir.2014). The parties agree that Wisconsin law applies to the key legal question presented in this case: whether the “manifestation” trigger theory or “continuous” trigger theory applies to the Policy. We construe the Policy as it would be understood by a reasonable person in the Strausses' position, but we will not interpret the Policy to provide coverage for risks the Chubb Defendants did not contemplate and for which they did not receive premiums. See Am. Family Mut. Ins. Co. v. Am. Girl, Inc.,

268 Wis.2d 16, 673 N.W.2d 65, 73 (2004).

The interpretation of an insurance contract is a question of law. Plastics Eng'g Co. v. Liberty Mut. Ins. Co., 315 Wis.2d 556, 759 N.W.2d 613, 620 (2009). In Wisconsin, insurance policies are interpreted under the same rules that apply to contract construction. See Marotz v. Hallman, 302 Wis.2d 428, 734 N.W.2d 411, 421 (2007). The primary objective in interpreting a contract is to ascertain and carry out the intentions of the parties. Wadzinski v. Auto–Owners Ins. Co., 342 Wis.2d 311, 818 N.W.2d 819, 824 (2012). The insurance policy's words shall be given their common and ordinary meaning, and when the policy language is plain and unambiguous, the policy is enforced as written, “without resorting to the rules of construction or principles from case law.” Johnson Controls, Inc. v. London Market, 325 Wis.2d 176, 784 N.W.2d 579, 586 (2010). If the language is ambiguous, its ambiguity is construed in favor of coverage for the insured. Id. The language of the policy determines the extent of coverage. Soc'y Ins. v. Town of Franklin, 233 Wis.2d 207, 607 N.W.2d 342, 345 (Wis.Ct.App.2000).

A. Coverage

For an insurance policy to potentially provide coverage to an insured, a triggering event must occur during the policy's period of enforcement. Soc'y, 607 N.W.2d at 345–46. Because a triggering event is necessary to implicate coverage, the core issue in this case is how coverage is triggered under the Policy for the water infiltration damage to the home. Wisconsin has described four different theories to determine whether a “triggering” event occurred during a relevant policy period:

The “exposure” theory fixes the date of injury as the date on which the injury-producing agent first contacted the body or the date on which pollution began. The “manifestation” theory holds that the compensable injury does not occur until it manifests itself in the form of a diagnosable disease or ascertainable property damage. The “continuous trigger” theory, also known as the “triple trigger” theory, provides that the injury occurs continuously from exposure until manifestation. Finally, the “injury-in-fact” theory allows the finder of fact to place the injury at any point in time that the effects of exposure resulted in actual and compensable injury.

Id. at 346; see also Michael G. Doherty, Allocating Progressive Injury Liability Among Successive Insurance Policies, 64 U. Chi. L.Rev. 257, 261 (1997). Here, the competing theories put forth by the parties are the manifestation and continuous triggers. Under the manifestation trigger theory, only the insurer that bears the risk at the time the loss manifests or can be discerned is responsible for indemnification once coverage is found to exist. Prudential–LMI Commercial Ins. v.Super. Ct., 51 Cal.3d 674, 274 Cal.Rptr. 387, 798 P.2d 1230, 1246–47 (1990). Under the continuous trigger theory in the context of progressive damage, all policies in effect from the time the loss begins to the time the loss manifests owe coverage. Plastics, 759 N.W.2d at 626. Selecting the proper trigger theory is a prerequisite to determining whether the water infiltration damage was covered.

The Chubb Defendants urge us to impose the manifestation trigger theory, primarily arguing that the continuous trigger theory should be limited to third-party coverage cases and that the manifestation trigger is the only trigger suitable to analyzing first-party property insurance policies. They cite a variety of cases from jurisdictions across the country utilizing the manifestation trigger in this context; however, noticeably absent from this list is any decision from a Wisconsin court. See generally, Scottsdale Ins. Co. v. CB Entm't, No. 11–22838–CIV, 2012 WL 2412154 (S.D.Fla. June 26, 2012) ; Mangerchine v. Reaves, 63 So.3d 1049 (La.Ct.Ap...