Wisconsin Elec. Power Co. v. California Union Ins. Co.

• Decision Date: 19 November 1987
• Docket Number: No. 87-0725,87-0725
• Citation: 142 Wis.2d 673,419 N.W.2d 255
• Parties: WISCONSIN ELECTRIC POWER COMPANY, Plaintiff-Respondent, v. CALIFORNIA UNION INSURANCE COMPANY and Southern American Insurance Company, Defendants-Appellants.
• Court: Wisconsin Court of Appeals

Page 255

419 N.W.2d 255

142 Wis.2d 673

WISCONSIN ELECTRIC POWER COMPANY, Plaintiff-Respondent, v. CALIFORNIA UNION INSURANCE COMPANY and Southern American Insurance Company, Defendants-Appellants.

No. 87-0725.

Court of Appeals of Wisconsin.

Submitted on Briefs Oct. 6, 1987.

Opinion Released Nov. 19, 1987.

Opinion Filed Nov. 19, 1987.

Review Denied.

Terrence C. Thom and Dorothy H. Dey of Prosser, Wiedabach & Quale, S.C., Milwaukee, for plaintiff-respondent.

Marie A. Darst and Gerald M. Linnihan of Jardine, Logan & O'Brien, St. Paul, Minn., for defendants-appellants.

Before MOSER, P.J., and WEDEMEYER and SULLIVAN, JJ.

MOSER, Presiding Judge.

This is an appeal from a summary judgment granted in favor of the Wisconsin

Electric Power Company (WEPCo), and against the California Union Insurance Company and the Southern American Insurance Company (collectively, "Cal Union"). The issues raised in this case are whether the trial court erred in determining by summary judgment that the policies issued by Cal Union provided coverage to WEPCo for its loss and whether the trial court erred in granting summary judgment as to damages. We hold that the trial court correctly decided these issues and affirm.

BACKGROUND AND FACTS

Although the facts of this case are complicated, they are not in dispute. In 1970, WEPCo installed a three-phase power supply to the dairy farm of Wallace and Joan Daggett (the Daggetts). Shortly after this new electrical source was installed, the Daggetts began noticing unusual behavior on the part of their cows including nervousness, a decline in milk production, failure to breed, ill health and sometimes death. In 1981, the cause of these problems was determined to be stray voltage from the new three-phase power supply. In 1982, WEPCo altered the power system and the problems with the dairy cows ended.

In 1983, the Daggetts filed suit against WEPCo for the damages sustained by them as a result of the harm to their cows. At the conclusion of the trial, the jury found in favor of the Daggetts and awarded damages in excess of $1,000,000. Before the trial court entered judgment, the Daggetts and WEPCo agreed to a settlement whereby WEPCo would pay $1,035,220.58 over a period of years. All of WEPCo's insurance carriers, including Cal Union, approved this settlement. ¹

In February of 1985, WEPCo made a demand on all its insurance carriers for indemnification in the amount of $935,220.58 (the settlement amount less the $100,000 self-insured retention) plus legal expenses of $336,227.52. Representatives of all eight insurance carriers met to discuss the allocation of this loss. A compromise was worked out among them to allocate the loss on a pro-rata basis. Cal Union did not agree to this compromise because it felt that it was not liable under any policy issued to WEPCo. The other carriers paid the amount allocated to them by the compromise. However, this left $148,700, the amount allocated to Cal Union, unpaid.

Because Cal Union continued to refuse to pay WEPCo, WEPCo filed an action in the circuit court for Milwaukee county seeking damages. The trial court, upon reading the terms of the policies issued by Cal Union, granted WEPCo's motion for summary judgment on the issue of Cal Union's liability. It also granted summary judgment on the issue of damages, awarding WEPCo $148,700 plus interest and costs. ² Cal Union appeals from this judgment.

CAL UNION'S LIABILITY

The first issue raised by Cal Union is whether its insurance policies provided coverage to WEPCo for the damages sustained by the Daggetts. Since the facts concerning this issue are undisputed, the trial court correctly concluded that construction of the insurance policy was a question of law properly decided on motion for summary judgment. ³ However, we owe no deference to the trial court's resolution of this issue. ⁴

We recently stated:

Contracts of insurance are controlled by the same principles of law that are applicable to other contracts. A policy of insurance like any other contract is to be construed so as to give effect to the intention of the parties. In the case of an insurance contract, the words are to be construed in accordance with the principle that the test is not what the insurer The relevant language to be interpreted in this case is:

intended the words to mean but what a reasonable person in the position of an insured would have understood the words to mean. Whatever[142 Wis.2d 678] ambiguity exists in a contract of insurance is resolved in favor of the insured. This is a restatement of the general rule that ambiguous contracts are to be construed most strongly against the maker or drafter. Words or phrases in a contract are ambiguous when they are reasonably or fairly susceptible to more than one construction. ⁵

1. COVERAGE

The Company does hereby agree to indemnify each Assured declared hereunder for ultimate net loss in excess of the underlying limits hereinafter stated, subject to the limitations, conditions and other terms of this insurance, which the Assured may sustain by reason of the liability imposed upon them by Law; or assumed by them under contract or agreement:

....

(f) Property Damage Liability

for damages because of injury to or destruction of tangible property, including the loss of use thereof, caused by an occurrence, and

....

The word "occurrence" wherever it appears herein means an accident or a continuous or repeated exposure to conditions which results in personal injury or property damage neither expected nor intended by the Assured. All such exposure to substantially the same general conditions existing and/or emanating from one location or source shall be deemed one occurrence.

....

5. PERIOD OF INSURANCE, TERRITORY

This insurance applies only to occurrences and or accidents which happen during the period of this insurance, anywhere in the world.

Cal Union argues that the occurrence giving rise to liability occurred in 1970 when WEPCo installed the faulty power supply system. Since Cal Union did not enter into any insurance contract with WEPCo until 1977, there was no occurrence which happened during the policy period. Therefore, Cal Union argues, it is not liable to indemnify WEPCo for the losses sustained by the Daggetts.

The trial court rejected this argument. In relying on the reasoning of Keene Corp. v. Insurance Co. of North America, ⁶ it held that "[t]he unreasonably dangerous condition rendering the product defective was an occurrence of a single uninterrupted continuous nature spanning 1973 through 1982 thus properly characterized as a continuing cause constituting an occurrence happening within the policy period."

In Keene, the plaintiff, Keene Corporation, sought a declaratory judgment of the liability of its insurance carriers. Specifically, Keene sought a declaration of which of its insurance carriers covered its product liability for asbestos-related diseases. Several of its carriers denied liability on the grounds that coverage was not triggered until the diseases manifested themselves. Another carrier argued that successive coverage was triggered by continued exposure. Thus, any carrier who insured Keene at any point that a plaintiff breathed asbestos would be liable.

In a well-reasoned opinion, the court adopted both of these arguments. Holding that the manifestation of the diseases was one trigger of coverage, the court stated: "A latent injury, unknown and unknowable to Keene at the time it purchased insurance, must, at least, be covered by an insurer on the risk at the time it manifests itself. Any other result would violate very reasonable expectations of Keene." ⁷

The court then went on to hold that exposure, even before any harm manifests The term "occurrence" as applied to the present case is ambiguous. ¹⁰ In the usual case, there is little dispute as to when an injury occurs when dealing with a common injury or accident. However, with this type of injury, there is considerable dispute as to when the injury is deemed to occur. ¹¹ It is therefore our duty to determine what a reasonable person in the position of the insured would have understood the words to mean.

                itself, also triggers coverage. 8  It interpreted "bodily injury" to mean any part of the single injurious process that asbestos-related diseases entail. 9
                

We agree with the reasoning of the Keene decision. Cal Union's policy states "[t]he word 'occurrence' ... means ... a continuous or repeated exposure to conditions which results in ... property damage neither expected nor intended by the Assured. All ... exposure to ... the same general conditions existing and/or emanating from one location or source shall be deemed one occurrence." A perfectly reasonable interpretation of this language, and the interpretation advanced by WEPCo, is that as long as there is harmful exposure to dangerous conditions, the occurrence is continuing. As in Keene, while any part of the single injurious process continues, the occurrence continues. This interpretation best protects the expectations and understandings of the insured. We therefore hold that the "occurrence" triggering coverage of the insurance policies began with the installation of the power supply in 1970 and continued uninterrupted until the problem was resolved in 1982. Since the occurrence was, in the terms of the policy, "happening" during the period of Cal Union's insurance, Cal Union's liability under the policy was triggered.

This interpretation is consistent with Wisconsin insurance law. While the precise issue raised here has never been addressed by our appellate courts, we find guidance in other insurance cases. In Welter v. Singer, ¹² we decided a case where a car struck a bicyclist, trapping him underneath the car. The driver of the car stopped, but then drove clear of the intersection dragging Welter beneath the car. In an attempt to find reverse gear, the driver...