U.S. v. Security Management Co., Inc.

• Decision Date: 24 October 1996
• Docket Number: Nos. 95-2579,95-2693,s. 95-2579
• Citation: 96 F.3d 260
• Parties: UNITED STATES of America, Plaintiff, v. SECURITY MANAGEMENT COMPANY, INCORPORATED, Defendant-Third Party Plaintiff-Appellee. AETNA CASUALTY AND SURETY COMPANY, a foreign corporation, Intervening Defendant-Appellant, v. VIGILANT INSURANCE COMPANY, Third Party Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 260

96 F.3d 260

UNITED STATES of America, Plaintiff, v. SECURITY MANAGEMENT COMPANY, INCORPORATED, Defendant-Third

Party Plaintiff-Appellee.

AETNA CASUALTY AND SURETY COMPANY, a foreign corporation, Intervening Defendant-Appellant, v. VIGILANT INSURANCE COMPANY, Third Party Defendant-Appellee.

Nos. 95-2579, 95-2693.

United States Court of Appeals Seventh Circuit.

Argued Jan. 9, 1996.

Decided Sept. 16, 1996.

Rehearing Denied Oct. 24, 1996.

Nathan A. Fishbach, Office of U.S. Attorney, Milwaukee, WI, Jessica Dunsay Silver, Gregory B. Friel, Department of Justice, Civil Rights Division, Appellate Section, Washington, DC, Paul F. Hancock, U.S. Department of Justice, Civil Rights Div., Housing & Civil Enf., Washington, DC, for Plaintiff.

William J. Mulligan, Michael R. Wherry (argued), James E. Culhane, Davis & Kuelthau, Milwaukee, WI, Robert A. Smith, Riester, Smith & McCarthy, Milwaukee, WI, for Defendants-Appellees Security Management Company, Inc., in No. 95-2579; Cedar Place, Evergreen Square, Heritage Village Apartments, Southtowne Village I, Southtowne IV, Heritage Arms, Security Three, Mark V Partnership, John J. Mark, John P. Mark, Joseph Mark, Janice Mark, William P. Mark, Thomas G. Mark, Catherine Mark, Susan Frechette, Rodney Oilschlager, James Condor, William Sidesky in No. 95-2693.

John D. Bird, Jr. (argued), Bird, Martin & Salomon, Milwaukee, WI, for Aetna Casualty & Surety Company.

Edward A. Hannan (argued), Beth A. Thorson, Godfrey, Braun & Hayes, Milwaukee, WI, Michael R. Wherry, James E. Culhane, Davis & Kuelthau, Milwaukee, WI, for Vigilant Insurance Company in No. 95-2579.

Edward A. Hannan (argued), Beth A. Thorson, Majorie M. Greene, Godfrey, Braun & Hayes, Milwaukee, WI, for Vigilant Insurance Company in No. 95-2693.

Katherine L. Charlton, Schneidman, Myers, Dowling & Blumenfield, Milwaukee, WI, for Intervenors-Plaintiffs Metropolitan Milwaukee Fair Housing Council, Fair Housing Counsel of Fox Valley, Kevin Tate, Shuying N. Vang, Xiong Lee.

Before WOOD, Jr., ESCHBACH, and DIANE P. WOOD, Circuit Judges.

HARLINGTON WOOD, Jr., Circuit Judge.

This complicated case arises out of a dispute over the meaning of a handful of seemingly simple words. The words in question are found in a primary insurance policy issued by Aetna Casualty and Surety Company ("Aetna") and in an "excess umbrella" policy issued by Vigilant Insurance Company ("Vigilant"). The feud concerns whether those words provide coverage to the policy holder, Security Management Company, Incorporated ("Security Management"), for alleged acts of racial discrimination in violation of the Fair Housing Act. The district court found that coverage was provided by Aetna, the primary insurer. Concluding that coverage was not provided by Aetna, but was instead provided by Vigilant, we reverse and remand.

I. BACKGROUND

The litigation underlying this matter commenced on May 18, 1992, when the United States filed a complaint to enforce the provisions of the Fair Housing Act, 42 U.S.C. § 3601 et seq. The United States alleged that Security Management, as apartment managers (and others, as apartment owners), violated various provisions of the Fair Housing Act by discriminating against black and Hmong persons and families with children. ¹ The Metropolitan Milwaukee Fair Housing Counsel, the Fair Housing Council of Fox Valley, and three individuals who had served as "testers" later intervened as plaintiffs.

During the period of the alleged discrimination, Aetna served as Security Management's primary insurer. Security Management also had excess umbrella coverage through Vigilant. On August 26, 1993, Aetna filed a motion to intervene as a defendant in order to obtain a determination of its duty to defend Security Management. On January 19, 1994, Security Management filed a third-party complaint against Vigilant in which it alleged that Vigilant also owed it a duty of defense and indemnification. Aetna then filed a cross-claim against Vigilant on March 31, 1994, in which it sought a declaration that Vigilant owed a duty to defend Security Management and indemnify Aetna for any amount Aetna became obligated to pay.

All of the parties eventually filed cross-motions for summary judgment. On November 29, 1994, all claims, except for those relating to coverage questions, were resolved by a consent order. Security Management agreed to pay a total of $173,000 to the intervening plaintiffs and their attorneys. Security Management also agreed to pay $45,000 to the United States as a civil penalty.

On May 31, 1995, the district court resolved the remaining coverage issues. The district court granted in part Security Management's cross-motion for summary judgment, determining that Aetna was obligated to defend and partially indemnify Security Management. The district court denied Security Management's cross-motion against Vigilant and it granted Vigilant's cross-motion for summary judgment against Security Management. Aetna now appeals the district court's coverage determination and Security Management cross-appeals the district court's determination that no indemnification is due for its payment of the intervening plaintiffs' attorneys' fees.

II. STANDARD OF REVIEW

The cross-motions for summary judgment all hinge upon a judicial ruling on the meaning of the two policies' relevant provisions; therefore, these matters are appropriate for summary resolution. Iowa Nat'l Mutual Ins. Co. v. Liberty Mutual Ins. Co., 43 Wis.2d 280, 168 N.W.2d 610 (1969). We review the district court's grant of summary judgment de novo. Pipefitters Welfare Educ. Fund v. Westchester Fire Ins. Co., 976 F.2d 1037, 1039 (7th Cir.1992). Under Wisconsin law, which governs this case, "[t]he construction of words and phrases in insurance policies is generally a matter of law and is controlled by the same rules of construction as are applied to contracts generally." Kremers-Urban Co. v. American Employers Ins. Co., 119 Wis.2d 722, 351 N.W.2d 156, 163 (1984). As a matter of law, we construe the policies' language de novo. Scottish Guarantee Ins. Co. v. Dwyer, 19 F.3d 307, 309 (7th Cir.1994).

III. DISCUSSION

Security Management contends alternatively that Aetna and Vigilant are obligated to defend and indemnify it under their respective insurance policies. Since the duty to defend is separate from, and broader than, the duty to indemnify, our analysis will first focus on each insurer's duty to defend.

To determine whether an insurer is obligated to assume the defense of a third-party suit, it is necessary to determine whether the complaint alleges facts which, if proven, would give rise to liability covered under the terms and conditions of the policy. Doubts about coverage must be resolved by the insurer in favor of the insured.

Sola Basic Indus., Inc. v. United States Fidelity & Guaranty Co., 90 Wis.2d 641, 280 N.W.2d 211, 213-14 (1979) (citations omitted). In construing the language of a policy, "the test is not what the insurer intended the words to mean but what a reasonable person in the position of the insured would have understood the words to mean." Kremers-Urban, 351 N.W.2d at 163. "The duty to defend is triggered by the allegations contained within the four corners of the complaint." Newhouse v. Citizens Sec. Mutual Ins. Co., 176 Wis.2d 824, 501 N.W.2d 1, 5 (1993).

A. The Aetna Policy ²

Coverage provided by the Aetna policy is divided into three parts--Commercial Property, Commercial General Liability, and Commercial Crime. The part relevant to the present matter, Commercial General Liability, is further divided into three sections--Bodily Injury and Property Damage Liability ("Coverage A"), Personal and Advertising Injury Liability ("Coverage B"), and Medical Payments ("Coverage C"). The parties contest the scope of Coverage A's "bodily injury" provision ³ and the scope of Coverage B's "personal injury" provision. ⁴

1. Personal Injury Coverage

We first turn, as did the district court, to the Aetna policy's personal injury coverage. The district court determined that the operant language was vague and it therefore interpreted the personal injury terms as a matter of law, resolving the ambiguities it uncovered in favor of the insured. Rejecting the ejusdem generis rule, the district court then concluded that personal injury coverage did exist for the alleged acts of discrimination. See also Gardner v. Romano, 688 F.Supp. 489, 492-93 (E.D.Wis.1988) (finding a duty to defend under similar language). Reviewing the language of the policy de novo, we conclude that coverage is not provided under this part of the Aetna policy.

First, we are uncertain of the district court's initial determination that the relevant language is vague. As quoted above, personal injury is defined to include "[t]he wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies by or on behalf of its owner, landlord or lessor." The parties agree that the complaints fail to invoke either the wrongful eviction or the wrongful entry clauses; it is the third clause which is the focus of the dispute. To us, the meaning of this third clause appears fairly clear: Simply put, coverage is extended to that category of cases which involve the invasion of a person's right of private occupancy. Where a term in an insurance policy is clear, it must "be given its ordinary and commonly accepted meaning." Lawver v. Boling, 71 Wis.2d 408, 238 N.W.2d 514, 517 (1976). Since a "right" is generally interpreted as constituting "[a] legally enforceable claim of one person against another," Black's Law Dictionary 1189 (5th ed. 1979), and since the testers unquestionably lacked any such enforceable claim of occupancy ⁵ at the time they applied for these apartments, coverage is not provided under this clause. See, e.g., Bernstein v. North East Ins. Co., 19 F.3d 1456 (D.C.Cir.1994); Martin v. Brunzelle, 699 F.Supp. 167 (N.D.Ill.1988...