Water Well Solutions Serv. Grp. Inc. v. Consol. Ins. Co.
| Decision Date | 30 June 2016 |
| Docket Number | No. 2014AP2484.,2014AP2484. |
| Citation | 369 Wis.2d 607,881 N.W.2d 285 |
| Parties | WATER WELL SOLUTIONS SERVICE GROUP INC., Plaintiff–Appellant–Petitioner, v. CONSOLIDATED INSURANCE COMPANY, Defendant–Respondent. |
| Court | Wisconsin Supreme Court |
For the plaintiff-appellant-petitioner, there were briefs by Timothy M. Hansen, Charles J. Crueger, James B. Barton, and Hansen Reynolds Dickinson Crueger LL, and oral argument by Timothy M. Hansen.
For the defendant-respondent, there was a brief by William J. Katt, Christina A. Katt, Corey J. Wright and Wilson Elser Moskowitz Edelman & Dicker, LLP, and oral argument by William J. Katt.
, J.
¶ 1 In this duty to defend case, Water Well Solutions Service Group Inc. (Water Well) asks us to reverse the court of appeals' decision1 affirming the Waukesha County Circuit Court's2 summary judgment decision in favor of Consolidated Insurance Company, Water Well's insurer. Applying the longstanding four-corners rule used to determine whether a complaint triggers the duty to defend, see Doyle v. Engelke, 219 Wis.2d 277, 284, 580 N.W.2d 245 (1998)
, both the circuit court and the court of appeals concluded that Consolidated did not breach its duty to defend Water Well. In response, Water Well argues this court should craft an exception to the four-corners rule allowing courts to consider extrinsic evidence when an insurer has unilaterally decided that no duty to defend exists based on exclusions in the insurance policy.
¶ 2 Specifically, we are asked to decide whether this court should allow admission of extrinsic evidence under a limited exception to the four-corners rule in cases where (1) the policy provides an initial grant of coverage based on facts alleged in the complaint, (2) the insurer denies a duty to defend its insured based on the application of specific policy exclusions but without seeking a coverage determination from a court, and (3) the insured asserts that the underlying complaint is factually incomplete or ambiguous. We are further asked to determine, absent an exception to the four-corners rule, whether a court should compare the four corners of the complaint to the entire insurance policy, including exclusions and exceptions, or if the court's review is limited to comparing the complaint to the terms of the policy governing the initial grant of coverage. We confirmed in Marks v. Houston Cas. Co., 2016 WI 53, ¶¶ 61–76, 369 Wis.2d 547, 881 N.W.2d 309
, that under the four-corners rule the entire policy must be examined, including the coverage-granting clauses, exclusions, and exceptions to any applicable exclusions.3 Thus, we also decide whether any exclusions in Consolidated's policy apply.
¶ 3 We affirm the court of appeals and hold that Consolidated did not breach its duty to defend Water Well. First, we reject Water Well's request to craft a limited exception to the four-corners rule, which has long endured to the benefit of Wisconsin insureds. We are not persuaded that an exception to this rule is necessary. Second, as we explain in Marks, 369 Wis.2d 547, ¶¶ 61–76
, released today in conjunction with this decision, the four-corners rule requires a court to compare the complaint to the terms of the entire insurance policy in determining whether the duty to defend is triggered. Thus, we reject Water Well's argument that the court's comparison is limited to reviewing the insurance policy's granting clause. The longstanding four-corners comparison rule applies in all duty to defend cases, including cases such as this one where the policy provides an initial grant of coverage, the insurer made a unilateral decision to refuse to defend based on specific policy exclusions, and the insured asserts the underlying complaint is factually incomplete or ambiguous. Finally, after comparing the four corners of the underlying complaint to the terms of the insurance policy at issue, we conclude that the “Your Product” exclusion applies to preclude coverage. As a result, Consolidated did not breach its duty to defend Water Well and is entitled to summary judgment as a matter of law; therefore, we affirm.
¶ 4 In 2009, Waukesha Water Utility (Waukesha) contracted with Water Well to perform work on Well # 10, an existing well located in the City of Waukesha. Waukesha hired Water Well to remove an existing pump, install a new pump, and complete reinstallations of the pump. In February 2011, the well pump unthreaded from a pipe column and fell to the bottom of the well.
¶ 5 Argonaut Insurance Company,4 Waukesha's insurer, filed suit against Water Well in federal district court. Argonaut's complaint alleged that “Water Well, its agents, employees and representatives” were negligent in the installation and reinstallations of the well pump and that “Water Well, its agents, employees and/or representatives” breached their contractual obligations. Specifically, Argonaut's complaint alleged that the well pump “unthreaded and separated from the pipe column,” which “caused the Well Pump, including the motor, to fall to the bottom of the approximately 1910–foot–deep well.” Argonaut asserted that Water Well failed to install two setscrews, “which allowed operating torques and vibrations to cause the Well Pump to rotate and unthread from the pipe column and caused the Well Pump to fall to the bottom of the well.” Argonaut sought $300,465.48 in subrogated damages. We set forth pertinent paragraphs of Argonaut's complaint in our analysis.
¶ 6 Water Well was insured under a Commercial General Liability Primary Policy (CGL policy) with Consolidated at the time the alleged damages occurred.5 Water Well tendered its defense to its insurer, Consolidated, in the action initiated by Argonaut. The parties do not dispute that the CGL policy provides an initial grant of coverage.6 However, Consolidated denied Water Well's defense tender stating it had no duty to defend or indemnify Water Well under the CGL policy because the “Your Work” and the “Your Product” exclusions applied and removed coverage for the damages alleged in Argonaut's complaint.
¶ 7 After Consolidated refused to defend Water Well in the Argonaut action, Water Well obtained counsel, incurred attorney's fees and costs, and eventually settled with Argonaut for $87,500. Water Well then filed suit against Consolidated, alleging that Consolidated breached its duty to defend Water Well in the underlying action initiated by Argonaut. Water Well also alleged that Consolidated acted in bad faith when it refused to provide a defense.7
¶ 8 The Waukesha County Circuit Court granted Consolidated's motion for summary judgment after considering cross-motions for summary judgment. It determined that under applicable Wisconsin case law, a court must compare the four corners of the complaint to the terms of the entire insurance policy when deciding whether an insurer breached its duty to defend its insured. The circuit court concluded that this comparison encompassed the policy's coverage provisions and exclusions, but not extrinsic evidence Water Well offered in support of its assertion that its subcontractor's work on preexisting pipes triggered coverage under the policy.8 Based on a comparison of the four corners of the complaint and the terms of the entire policy, the circuit court determined that the allegations in the Argonaut complaint fell under both the “Your Product” and the “Your Work” exclusions. Therefore, it concluded that “there is no covered claim and therefore there was no duty to defend.”9
¶ 9 The court of appeals affirmed in a published decision. Water Well Sols. Serv. Grp. Inc. v. Consol. Ins. Co., 2015 WI App 78, ¶ 1, 365 Wis.2d 223, 871 N.W.2d 276
. The majority's reasoning mirrored the circuit court's: it reviewed the four corners of Argonaut's complaint, compared the complaint to the terms of the entire insurance policy, and concluded that both the “Your Work” and the “Your Product” exclusions eliminated coverage. Id., ¶¶ 6–7, 10, 13, 16–18.
¶ 10 We granted Water Well's petition for review.
¶ 11 We independently review a grant of summary judgment using the same methodology of the circuit court and the court of appeals. Blasing v. Zurich Am. Ins. Co., 2014 WI 73, ¶ 21, 356 Wis.2d 63, 850 N.W.2d 138
. Summary judgment is appropriate when there is no genuine dispute of material fact and the moving party is entitled to judgment as a matter of law. Wis. Stat. § 802.08(2)
(2013–14);10
Blasing, 356 Wis.2d 63, ¶ 21, 850 N.W.2d 138.
¶ 12 This case requires the court to interpret an insurance policy to determine whether an insurer breached its duty to defend its insured. Interpretation of an insurance contract presents a question of law that we review de novo. Estate of Sustache v. Am. Family Mut. Ins. Co., 2008 WI 87, ¶ 18, 311 Wis.2d 548, 751 N.W.2d 845
.
¶ 13 Before reaching the dispositive issue in this case, we first set forth general principles governing interpretation of insurance policies as well as the process typically used by courts in duty to defend cases.
¶ 14 Insurance policies are contracts that generally establish an insurer's “duty to indemnify the insured against damages or losses, and the duty to defend against claims for damages.” Olson v. Farrar, 2012 WI 3, ¶ 27, 338 Wis.2d 215, 809 N.W.2d 1
. We interpret insurance policies in the same manner as other contracts—to give effect to the intent of the contracting parties. Am. Family Mut. Ins. Co. v. Am. Girl, Inc., 2004 WI 2, ¶ 23, 268 Wis.2d 16, 673 N.W.2d 65. We construe policy language as a reasonable person in the position of the insured would understand such language. Estate of Sustache, 311 Wis.2d 548, ¶ 19, 751 N.W.2d 845.
¶ 15 Longstanding case law requires a court considering an insurer's duty to defend its insured to compare the four corners of the underlying complaint to the terms of the entire...
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