Talley v. Mustafa

Decision Date11 May 2018
Docket NumberNo. 2015AP2356,2015AP2356
Citation381 Wis.2d 393,911 N.W.2d 55,2018 WI 47
Parties Archie A. TALLEY, Plaintiff-Appellant, v. MUSTAFA MUSTAFA, d/b/a Burleigh Liquor, a/k/a Burleigh Food Market and Adams Foods, LLC, Defendants, Auto–Owners Insurance Company, Defendant-Respondent-Petitioner.
CourtWisconsin Supreme Court

For the defendant-respondent-petitioner, there were briefs filed by Justin F. Wallace, William R. Wick, and Nash, Spindler, Grimstad, & McCracken, LLP, Manitowoc. There was an oral argument by Justin F. Wallace.

For the plaintiff-appellant, there was a brief filed by George E. Chaparas and Carlson, Blau & Clemens, S.C., Milwaukee. There was an oral argument by George E. Chaparas.

An amicus curiae brief was filed on behalf of The Wisconsin Insurance Alliance by James A. Friedman, Mark W. Hancock, and Godfrey & Kahn, S.C., Madison.


¶ 1 In this insurance coverage dispute, we consider whether a business-owners liability policy covers a negligent supervision claim arising out of an alleged employee's1 intentional act of physically punching a customer in the face. We hold that this insurance policy does not provide coverage under these circumstances. When the negligent supervision claim pled rests solely on an employee's intentional and unlawful act without any separate basis for a negligence claim against the employer, no coverage exists. Accordingly, we reverse the decision of the court of appeals,2 which reversed the circuit court's3 grant of summary judgment in favor of Auto–Owners Insurance Company (Auto–Owners) on the coverage issue. The circuit court correctly concluded that there is no coverage under this business liability insurance policy for either the employee's intentional act or the negligent supervision claim against the employer arising solely out of the employee's intentional act.4


¶ 2 The insurance coverage issue in this case arises from an incident that occurred in July 2009 at a neighborhood convenience store, Burleigh Food Market. Mustafa Mustafa owned and operated the store, and at the time carried a "Businessowners' Liability Policy" with Auto–Owners.5

¶ 3 The provisions in the business liability insurance policy provide, as material:

1. Business Liability We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" ... to which this insurance applies. No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under COVERAGE EXTENSION SUPPLEMENTARY PAYMENTS.
a. This insurance applies only:[6]
(1) To "bodily injury" or "property damage":
(a) That occurs during the policy period; and
(b) That is caused by an "occurrence". The "occurrence" must take place in the "coverage territory".
1. Applicable to Business Liability Coverage
This insurance does not apply to:
a. "Bodily injury" or "property damage" expected or intended from the standpoint of the insured. This exclusion does not apply to "bodily injury" resulting from the use of reasonable force to protect persons or property.
1. If you are designated in the Declarations as:
a. An individual, you and your spouse are insureds, but only with respect to the conduct of a business of which you are the sole owner.b. A partnership or joint venture, you are an insured. Your members, your partners and their spouses are also insureds, but only with respect to the conduct of your business.
c. An organization other than a partnership or joint venture, you are an insured. Your executive officers and directors are insureds, but only with respect to their duties as your officers or directors. Your stockholders are also insureds, but only with respect to their liability as stockholders.
2. Each of the following is also an insured:
a. Your employees, other than your executive officers, but only for acts within the scope of their employment by you.
3. "Bodily injury" means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.
9. "Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

(Some formatting altered).

¶ 4 On July 24, 2009, Archie A. Talley walked into Mustafa's store to buy beer. Talley claims that while he was inside the store, Mustafa's security guard, Keith Scott, punched him in the face twice.

Talley left the store and called police to report the assault. Talley was taken to the hospital where he was treated for a broken jaw.

¶ 5 On July 17, 2012, Talley filed suit against Mustafa, Keith Scott,7 and Mustafa's insurer, Auto–Owners. The complaint alleged, as material:

"[Keith Scott] was a[n] employee, security guard and/or customer of the defendant, Mustafa Mustafa."
"Auto–Owners ... issued a policy of liability insurance wherein it agreed, among other things, to pay up to the limits of its policy any and all damages sustained as a result of negligence in the ownership and/or maintenance of ... Burleigh Food Market."
• As Talley entered the store, "the alleged security guard on the premises, began a verbal altercation with" Talley. Talley, "while walking in the premises was then struck by the security guard twice, fracturing his jaw."
"The defendants had a duty to properly train and supervise their employees and have a duty to exercise the highest degree of care for the safety of their customers from any harm that might befall them by reason of the actions and/or conduct of their employees."
"The defendants failed to provide adequate or proper security for their customers, and further said defendants, their agents, employees, or representatives, were the parties who attacked the plaintiff. A videotape viewed by officers of the Milwaukee Police Department from the defendants' own security system, showed the assault."

¶ 6 Auto–Owners hired counsel to represent Mustafa. Auto–Owners filed an Answer and conducted discovery, which revealed issues related to coverage. In January 2014, Auto–Owners notified the insured that it was defending the case under a reservation of rights letter. In October 2014, Auto–Owners filed a motion to bifurcate the issues of coverage and liability and stay the proceedings on the latter so that the coverage issue could be decided before the liability issues were tried.

¶ 7 The circuit court granted the motion to bifurcate and stayed the trial on the merits to "allow the defendant to seek a declaratory judgment with regard to insurance coverage issues." Mustafa hired his own lawyer to represent him on the coverage issue. In February 2015, Auto–Owners filed its motion for declaratory and summary judgment, asking the circuit court to declare that the insurance policy does not provide coverage, and to grant summary judgment dismissing Auto–Owners from the lawsuit. Auto–Owners asserted that no coverage existed under the policy because: (1) Scott was not Mustafa's employee, and therefore not an insured; (2) even if a factual dispute about Scott's status exists, Mustafa did not believe Scott was an employee; (3) an intentional assault—punching someone in the face—is not an "occurrence" under the insurance policy and excluded by the intentional acts exclusion; (4) there can be no coverage for a negligent supervision claim based on an assault, and no negligent supervision claim exists because Scott was not an employee.

¶ 8 The circuit court held two hearings on the motion and both times concluded the Auto–Owners insurance policy did not provide coverage for Scott or for Mustafa. The circuit court addressed the intentional act at the May 2015 hearing and held:

"So if it's an intentional act, those things are clearly not covered under Wisconsin law. It wasn't an occurrence."
• Attorneys trying to get coverage for an intentional act will "try to shoehorn in [a] negligence claim" to make the intentional act an occurrence. "[T]his is not anything other than an intentional tort. It doesn't fall within the definition of an accident that's covered by the policy."
• Auto–Owners "has aptly pointed out in [its] brief of what an occurrence is under Wisconsin law. And intentional acts are simply not covered because they are not accidents."
"And that's the ruling of the Court, and there's no coverage."

¶ 9 The circuit court held a second hearing in September 2015 to address whether coverage existed for the negligent supervision claim, which was not discussed at the May 2015 hearing. The circuit court held:

"Punching somebody is not a negligent act."
• Talley says "Scott used unreasonable force" so the exception in the policy that permits reasonable force does not apply. "[Talley] state[s] unequivocally that it was unreasonable force." "[T]he pure undisputed facts as asserted by the plaintiff with no doubt regardless of employment is that this force was unreasonable."
• Insurance polices do not cover the unreasonable use of force regardless of employment.
• Talley did not have any facts separate from the punch in the face to support the negligent supervision claim. "You've got to tell me exactly how some employer is supposed to supervise or train somebody to do what? To commit acts of unreasonable force." "You have to tell this Court just what it is that would make somebody negligently supervised."
"There's only one act that caused an injury here." "And that's an unreasonable force as undisputed by the plaintiff."

¶ 10 The circuit court entered judgment in favor of Auto–Owners and dismissed the insurer from the case. Talley appealed. The court of appeals reversed in a split decision, with Judge Paul F. Reilly in dissent. See Talley v. Mustafa, 2017 WI App 31, 375 Wis. 2d 757, 897 N.W.2d 55. The majority of the court of appeals held that a reasonable insured would expect coverage for the negligent...

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