Ward Management Co. v. Westport Ins. Corp.
| Decision Date | 17 February 2009 |
| Docket Number | No. 08-cv-206-bbc.,08-cv-206-bbc. |
| Citation | 598 F.Supp.2d 923 |
| Parties | WARD MANAGEMENT COMPANY, Plaintiff, v. WESTPORT INSURANCE CORPORATION, Defendant. |
| Court | U.S. District Court — Western District of Wisconsin |
Ryan J. Steffes, Weld, Riley, Prenn & Ricci, S.C., Eau Claire, WI, for Plaintiff.
Christopher R. Parr, Jennifer Geelan, Zelle, Hofmann, Voelbel & Mason LLP, Minneapolis, MN, Kendall W. Harrison, Godfrey & Kahn, S.C., Madison, WI, for Defendant.
In this civil lawsuit, which was removed from the Circuit Court for St. Croix County, plaintiff Ward Management Company alleges that defendant Westport Insurance Corporation breached its insurance contract with plaintiff and engaged in bad faith when it refused to pay for losses plaintiff suffered as a result of employee theft at its Pizza Hut restaurant. Defendant has moved for summary judgment as to both claims, contending that the statute of limitations bars plaintiff's suit.
Defendant's motion for summary judgment will be granted. The employee dishonesty coverage in defendant's policy comes within the category of "fire insurance" under Wis. Stat. § 631.83(1)(a). Under § 631.83(1)(a), an action on a fire insurance policy must be brought within one year of the loss. Defendant allowed its insureds two years in which to bring an action. Despite the additional time, plaintiff did not file this action until four years after the date of the last employee theft. As a consequence, its action for breach of the insurance contract is time-barred. Its bad faith claim is barred as well. Although plaintiff contends that defendant's bad faith continued to a time within the applicable two-year limitations period, the claim itself accrued more than two years before plaintiff filed its complaint.
As an initial matter, I note that defendant has submitted evidence establishing the amount in controversy and diversity of citizenship. Jurisdiction is present under 28 U.S.C. § 1332.
From the parties' proposed findings of fact, I find the following facts to be material and undisputed.
Plaintiff Ward Management Company is a "C" corporation organized and existing under the laws of Wisconsin, with its principal place of business in Altoona, Wisconsin. Charles Ward is the president and owner of plaintiff.
Defendant Westport Insurance Company is a Missouri corporation with its principal place of business in Overland Park, Kansas.
In January 2001, Charles Ward began to suspect several employees of stealing from plaintiff's Hudson, Wisconsin Pizza Hut Restaurant. Plaintiff conducted monthly employee meetings during 2001, one purpose of which was to discuss and attempt to uncover suspected employee thefts. In August 2001, plaintiff fired two employees for suspected theft. Although the plaintiff contacted police, those employees were never arrested.
Throughout 2002 and 2003, plaintiff continued to experience cash shortages that Ward believed were the result of theft. In October 2003, Ward hired a private investigator who discovered that eight employees were stealing from the restaurant. Plaintiff terminated these eight employees in November 2003 and contacted police on November 22, 2003. Eventually, seven of the eight employees were convicted of theft.
From July 1, 2002 to July 1, 2004, defendant insured plaintiff under two consecutive insurance policies. These similar policies are multi-part policies that include both Commercial Property coverage and Commercial General Liability coverage. The Commercial Property portion of the policies contained a limitation provision providing that "[n]o one may bring a legal action against us under this Coverage Part unless the action is brought within 2 years after the date on which the direct physical loss or damage occurred."
Under the Commercial Property portion of the policies, "[d]ishonest or criminal acts" by employees are generally excluded from coverage, except under the subpart for Building and Personal Property coverage, which provides that "[w]e will pay for direct loss or damage to Business Personal Property and `money' and `securities' resulting from dishonest acts committed by any of your employees . . . The most we will pay for loss or damage in any one occurrence is $250,000, unless a different limit is shown in the Schedule."
In December of 2003, plaintiff's insurance broker, Insurance Management Agency (IMA), gave defendant notice that plaintiff was seeking coverage under the Commercial Property and General Liability policy for the alleged theft losses plaintiff incurred between January 2001 and November 21, 2003, while placing plaintiff's previous insurer, Legion Insurance Company, on notice for theft losses between June 2000 and May 2002.
After receiving plaintiff's claim in 2003, defendant's independent adjuster, Larry Staub, conducted a recorded interview with Charles Ward and told Ward to submit a proof of loss to document the theft claim. On May 21, 2004, when Ward had still not submitted documentation in support of the claim, Staub wrote to Ward to advise him that because he had not submitted documentation, defendant would close its file. On August 19, 2004, defendant closed the investigation file, citing "non-pursuit" by the plaintiff.
On June 29, 2005, Ward submitted a copy of a signed proof of loss that he had previously submitted to Legion Insurance Company, claiming $1,045,742.14 for losses incurred between January 2001 and November 21, 2003. On September 29, 2005, Ward submitted a new proof of loss to defendant that set out a claim for $822,519.14 resulting from the employee thefts. Defendant rejected the proof of loss on October 18, 2005, telling plaintiff that the proof did not accurately reflect the amount of the covered loss.
Defendant retained forensic accountants Peters & Associates to review plaintiff's accounting files to assess the factual support for the claimed amount. A December 14, 2005 report from the accountants calculated plaintiff's loss at $85,106. In a February 6, 2006 letter, which plaintiff received on February 14, 2006, defendant offered $51,692 to settle the claim. Ward considered the offer an insult and gave the matter to plaintiff's counsel. On May 17, 2006, after plaintiff rejected defendant's offer to settle, defendant asked Greg Martin, an insurance adjuster at Property General Adjusters, LLC, to review the claim file. Martin concluded in a May 30, 2006 report that
On February 25, 2008, plaintiff filed this action against defendant for breach of contract. On June 2, 2008, plaintiff filed a first amended complaint asserting a claim for bad faith and alleging that defendant "lacked a reasonable basis for refusing to fully indemnify Plaintiff's losses."
OPINIONThe parties agree that the last known theft of plaintiff's Pizza Hut restaurant occurred in November 2003. They disagree about which statute sets the floor for the limitations period on employee dishonesty insurance coverage: the general six-year statute of limitations, under Wis. Stat. §§ 631.83(1)(d) and 893.43, or the one-year floor for "fire insurance" under Wis. Stat. § 631.83(1)(a) ().
Wisconsin courts have construed the term "fire insurance" broadly to include insurance policies covering losses other than losses from fire. E.g., Villa Clement v. National Union Fire Insurance Co., 120 Wis.2d 140, 353 N.W.2d 369 (Ct.App.1984) (flood damage); Arnold v. Cincinnati Insurance Co., 2004 WI App 195, 276 Wis.2d 762, 688 N.W.2d 708 (mold damage); Jones v. Secura Insurance Co., 2002 WI 11, 249 Wis.2d 623, 638 N.W.2d 575 (); Martin v. Liberty Mutual Fire Insurance Co., 97 Wis.2d 127, 293 N.W.2d 168 (1980) (wind damage); Bronsteatter & Sons, Inc. v. American Growers Insurance Co., 2005 WI App 192, 286 Wis.2d 782, 703 N.W.2d 757 (property vandalism); Borgen v. Economy Preferred Insurance Co., 176 Wis.2d 498, 500 N.W.2d 419 (Ct.App.1993) (hailstorm damage). In Villa Clement, 120 Wis.2d at 148, 353 N.W.2d at 373, the court held that the term "fire insurance" is a generic term that applies to all types of property indemnity insurance. The agency now in charge of classifying insurance lines, the Commissioner of Insurance, defines "fire, inland marine and other property insurance" as insurance against "loss or damage to real and personal property . . . arising out of fire or any other peril." Wis. Admin. Code Ins. § 6.75 (emphasis added). As defined in Villa Clement, "fire insurance" seems broad enough to include insurance policies covering theft, which is another type of damage to real or personal property.
However, no published case has specifically addressed the question whether theft falls under the general "fire insurance" policy in § 631.83(1)(a). Plaintiff cites Gamma Tau Educational Foundation v. Ohio Casualty Insurance Co., 41 Wis.2d 675, 165 N.W.2d 135 (1969), as an example of a case in which the Supreme Court of Wisconsin applied a six-year statute of limitations to a fraud case. However, Gamma Tau was decided before the...
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