Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Smith v. Anderson

Supreme Court of Wisconsin

April 27, 2017

Maya Elaine Smith, Plaintiff,
v.
Jeff Anderson, d/b/a Anderson Real Estate Services, Defendant-Third-Party Plaintiff,
v.
4th Dimension Design, Inc., Third-Party Defendant, R & B Construction, Inc., Third-Party Defendant-Appellant-Petitioner, West Bend Mutual Insurance Company, Intervenor-Respondent.

          SUBMITTED ON BRIEFS: ORAL ARGUMENT: October 18, 2016

          REVIEW OF A DECISION OF THE COURT OF APPEALS Reported at 366 Wis.2d 808, 874 N.W.2d 347 (WI Ct. App. 2016 - Unpublished)

         Circuit Milwaukee county (L.C. No. 2013CV7085), PEDRO COLON JUDGE

          Review of the decision of the Court of Appeals is dismissed as improvidently granted.

          For the third-party defendant-appellant-petitioner, there were briefs by John E. Machulak and Machulak, Robertson & Sodos, S.C., Milwaukee, and oral argument by John E. Machulak.

          For the intervenor-respondent, there was a brief by Jeffrey L. Leavell, Danielle N. Rousset and Jeffrey Leavell, S.C., Racine, and oral argument by Jeffrey L. Leavell.

          PER CURIAM.

         ¶1 On April 6, 2016 we granted R&B Construction, Inc.'s petition for review of an unpublished decision of the Court of Appeals.[1] Briefing of the parties and of the amicus, Wisconsin Defense Counsel, Inc., were timely completed, and on October 18, 2016, the court held oral argument.

         ¶2 The petition for review asked the court to decide: (1) whether a third-party complaint may state a claim for which an insurance company has a duty to defend when the third-party plaintiff was sued for misrepresentation by the first-party plaintiff; (2) whether a third-party defendant may supplement the third-party complaint with additional facts when the third-party defendant seeks a defense from its insurance company; and (3) whether summary judgment denying a claim for defense conclusively concludes the duty to defend question, notwithstanding subsequent developments in the lawsuit.

         ¶3 The circuit court granted summary judgment to West Bend Mutual Insurance Company.[2] The circuit court concluded that there was no initial grant of coverage and also, if there were an initial grant of coverage, the policy exclusions prevented coverage for the claims for which R&B Construction sought defense. Therefore, West Bend Mutual had no duty to defend. The circuit court dismissed West Bend Mutual from the lawsuit and R&B appealed.

         ¶4 In considering R&B's claim that West Bend Mutual had a duty to defend R&B, the Court of Appeals decided no defense was due based solely on its conclusion that there was no initial grant of coverage for the injury from which a duty to defend could arise.[3] However, that was not the only argument that West Bend Mutual made to the Court of Appeals. West Bend Mutual also asserted that if the Court of Appeals concluded that there was an initial grant of coverage, the policy exclusions obviated coverage and therefore, there was no duty to defend.

         ¶5 The petition for review and the responses presented to us during our review focused on the Court of Appeals decision. Therefore, they were limited to whether there was an initial grant of coverage under the policy. No party argued that if there was an initial grant of coverage, the policy exclusions nevertheless precluded coverage. Therefore, no party challenged the circuit court's conclusion that the policy exclusions precluded coverage, a conclusion that the Court of Appeals' decision left in place because the Court of Appeals did not address policy exclusions.

         ¶6 In 2016, we decided Water Well Sol. Serv. Group, Inc. v. Consolidated Ins. Co., 2016 WI 54, 369 Wis.2d 607, 881 N.W.2d 285. One of the questions presented in Water Well was whether a four-corners analysis required interpretation of the entire policy, i.e., whether there was an initial grant of coverage and whether any exclusion or exception affected coverage. Id., ¶2. We concluded that when a claim for defense is made, courts must interpret the entire policy - including any grant of coverage and all applicable exclusions and exceptions to exclusions that bear on coverage. Id., ¶¶2-3 (citing Marks v. Houston Cas. Co., 2016 WI 53, ¶¶61-76, 369 Wis.2d 547, 881 N.W.2d 309');">881 N.W.2d 309).

         ¶7 In the case now before us, if we were to stop our analysis after determining that there was an initial grant of coverage, the parties would not receive a full four-corners analysis. Our decision could be viewed as retreating from the clear directive we gave in Water Well where we said, "under the four-corners rule the entire policy must be examined, including the coverage-granting clauses, exclusions, and exceptions to any applicable exclusions." Id., ¶2.

         ¶8 Our decision also would create confusion because the circuit court concluded that the "Your Work" exclusion precluded coverage, and that decision was not overturned by the Court of Appeals. Before us, neither party briefed or argued that coverage was precluded by a policy exclusion. Therefore, were we to follow the lead of the parties and the Court of Appeals and not address exclusions and any applicable exceptions to exclusions, a question would remain about whether West Bend Mutual had a duty to defend R&B because the circuit court concluded that an exclusion precluded coverage under the West Bend policy.

         ¶9 Accordingly, because there are coverage questions for which no argument or briefing was provided to us and because deciding only whether there is a grant of coverage will cause confusion and provide no answer to the parties on how they are to proceed, we conclude that the petition for review was improvidently decided.

         The review of the decision of the court of appeals is dismissed as improvidently granted.

         ¶10 ANNETTE KINGSLAND ZIEGLER and REBECCA GRASSL BRADLEY, JJ., did not participate.

         ¶11 PATIENCE DRAKE ROGGENSACK, C.J. (concurring). Although I agree that the review herein was improvidently granted, I write in concurrence for two reasons: (1) to point out the significant risk parties face in failing to complete a full, four-corners analysis before us, as is required by Water Well Sol. Serv. Group, Inc. v. Consolidated Ins. Co., 2016 WI 54, ¶2, 369 Wis.2d 607, 881 N.W.2d 285, and (2) to avoid public confusion, which could result from Justice Abrahamson's dissent.

         ¶12 Unlike the full, four-corners analysis, which the parties completed in both the circuit court and the court of appeals, they presented only a partial analysis here. They addressed only the initial grant of coverage issue. As is apparent from Justice Abrahamson's writing that follows, she would conclude that there was an initial grant of coverage. West Bend Mutual ignored the risk that we could conclude that its policy made an initial grant of coverage when West Bend Mutual limited the issues it presented to us and did not address the policy exclusions. Ms. Smith ignored the risk that the circuit court's conclusion that the "Your Work" exclusion precluded coverage when she chose not to attack that decision as part of her review here. As a cautionary note, a full, four-corners analysis is required, as we explained in Water Well.

         ¶13 Justice Abrahamson states, "We conclude" that no policy exclusion excuses West Bend's duty to defend. However this conclusion is unsupported by anything other than one sentence found in ¶43 of her writing. In ¶43, she also states, "we reverse the decision of the court of appeals, " when the majority of the court does not reverse the decision of the court of appeals. Accordingly, I write to avoid the potential for public confusion that her writing may create.

          SHIRLEY S. ABRAHAMSON, J. (dissenting).

         ¶14 This court seriously errs in dismissing this petition for review as improvidently granted. It errs because the parties and the public need a decision from this court on the important issues the parties presented, briefed, and argued in this court.

         ¶15 This dismissal embodies regrettable appellate practice given the circumstances of this case and the court's scanty workload.

         ¶16 This dismissal has unnecessarily caused these parties and the amicus curiae expense and delay without giving the parties, the amicus, or the public the benefit of a decision on important issues.[1]

         ¶17 The parties have been awaiting a final appellate decision for more than two years since the circuit court issued its judgment. Obviously, they have incurred substantial expenses. The circuit court entered judgment on November 25, 2014. The court of appeals issued its decision on December 22, 2015. This court granted R&B Construction's petition for review on April 6, 2016. R&B Construction, Inc., West Bend Mutual Insurance Company, and Wisconsin Defense Counsel Inc., as amicus curiae, all filed briefs in this court. This court held oral argument on October 18, 2016.

         ¶18 The petition for review in the instant case raised the following significant issues:

1. Can a third-party complaint state a claim that an insurance company has a duty to defend, where the complaint against the third-party plaintiff is for misrepresentation?
2.Should a party looking to his insurance company to provide him with a defense be able to introduce information not stated in the pleadings to show that there could be claims requiring his insurer to provide a defense?
3.Can a party denied a defense after his insurance company succeeds on a motion for summary judgment reassert a right to a defense if later developments in the case show that he is entitled to a defense?

         ¶19 We granted review of these issues because they are law-developing. Resolving the first issue relating to third-party practice would have given this court the opportunity to explain the proper application of the four-corners rule in duty-to-defend cases involving third-party complaints and answers.

         ¶20 The case also presents yet another important opportunity to educate litigants and ourselves about preserving issues for review in this court. We have missed a good opportunity to once again clarify the rules of appellate practice.

         ¶21 Furthermore, the court's case load is scanty. We probably will decide fewer than 55 cases from September 2016 through June 2017 (up from fewer than 45 cases from September 2015 through June 2016).

         ¶22 Here are the circumstances leading to the untoward dismissal in the instant case.

         ¶23 The court of appeals held in favor of West Bend Insurance on coverage, a dispositive issue. As a result, the court of appeals need not, and did not, decide whether certain policy exclusions precluded a duty to defend.[2] Because West Bend Insurance failed to assert in this court that its duty to defend was precluded by policy exclusions, an argument that would have supported the decision of the court of appeals, West Bend Insurance waived (forfeited) its right to have this court decide the policy exclusion issue as a matter of right.

         ¶24 To preserve the issue of the effect of the policy exclusions for review as a matter of right in this court, West Bend Insurance was required to present the issue of policy exclusions to this court. It could have accomplished this goal in one of two ways.

         ¶25 West Bend Insurance could have presented the issue of policy exclusions to this court in its response to R&B Construction's petition for review. Wisconsin Stat. § (Rule) 809.62(3)(d) provides: "If filed, the response may contain any of the following: . . . (d) Any alternative ground supporting the court of appeals result or a result less favorable to the opposing party than that granted by the court of appeals."[3] West Bend did not present the issue of policy exclusions in its response to R&B Construction's petition for review.[4]

         ¶26 Alternatively, West Bend Insurance could have asserted and discussed the issue of policy exclusions in its brief in this court.[5] West Bend Insurance's brief in this court did not present or develop this issue of policy exclusions.

         ¶27 Having taken neither alternative course of action, West Bend Insurance has not preserved this issue for review as a matter of right.

         ¶28 In light of West Bend Insurance's failure to preserve the issue of policy exclusions as a matter of right, the court has three alternative courses of action it might take in the instant case: (1) The court may review the issue; (2) the court may decide West Bend Insurance has waived (forfeited) the right to a review of the issue; or (3) the court may remand the issue to the court of appeals for a review of the decision of the circuit court on the issue.[6]

         ¶29 Holding West Bend Insurance to have waived (forfeited) the application of its policy exclusions is especially apt in the instant case. The court should not decide the issue without briefs.[7] Nor should the court examine the briefs filed in the court of appeals on appeal from the circuit court in lieu of requiring briefs here. The order granting the petition for review explicitly states that if a party wishes to rely on any materials in its brief to the court of appeals, the material has to be restated in the brief filed in this court. Nor should the court order additional briefs here or remand the issue to the court of appeals. West Bend Insurance was fully cognizant of the policy exclusion issue and obviously decided not to raise it in this court. There is no compelling reason to give West Bend Insurance another kick at the can.[8]

         ¶30 Here's the opinion that I think this court should be issuing reversing the decision of the court of appeals: * * * *

         REVIEW of a decision of the Court of Appeals. Reversed and remanded.

          SHIRLEY S. ABRAHAMSON, J.

         ¶31 This is a review of an unpublished decision of the court of appeals.[9] The court of appeals affirmed the order of the circuit court for Milwaukee County, Pedro Colon, Judge, granting summary judgment in favor of West Bend Mutual Insurance Company against its insured, R&B Construction, Inc. The circuit court declared that West Bend Insurance had no duty to defend its insured, R&B Construction, with respect to a third-party complaint Jeff Anderson, d/b/a Anderson Real Estate Services, filed against R&B Construction, Inc.

         ¶32 According to the court of appeals, the third-party complaint did not allege "property damage" or an "occurrence" under the terms of the insurance policy.

         ¶33 For the reasons set forth, we conclude that the allegations against R&B Construction in Jeff Anderson's third-party complaint assert property damage caused by an occurrence, as those words are used within the insurance policy issued by West Bend Insurance. Thus, West Bend Insurance has a duty to defend R&B Construction in Jeff Anderson's third-party action.

         ¶34 West Bend Insurance failed to assert in this court that its duty to defend was precluded by exclusions in the policy. Thus, West Bend Insurance failed to preserve this issue for review as a matter of right. It has waived or forfeited this issue.

         ¶35 The facts giving rise to the waiver or forfeiture began when the court of appeals held in favor of West Bend Insurance on coverage, a dispositive issue, and did not decide whether certain policy exclusions precluded a duty to defend.[10]Because West Bend Insurance failed to assert in this court that its duty to defend was precluded by policy exclusions, an argument that would have supported the decision of the court of appeals, West Bend Insurance waived (forfeited) its right to have this court decide the policy exclusion issue as a matter of right.

         ¶36 To preserve the issue of the effect of the policy exclusions for review as a matter of right in this court, West Bend Insurance was required to present the issue of policy exclusions to this court. It could have accomplished this in one of two ways.

         ¶37 West Bend Insurance could have presented the issue of policy exclusions to this court in its response to R&B Construction's petition for review. Wisconsin Stat. § (Rule) 809.62(3)(d) provides: "If filed, the response may contain any of the following: . . . (d) Any alternative ground supporting the court of appeals result or a result less favorable to the opposing party than that granted by the court of appeals."[11] West Bend did not present the issue of policy exclusions in its response to R&B Construction's Petition for Review.[12]

         ¶38 Alternatively, West Bend Insurance could have asserted and discussed the issue of policy exclusions in its brief in this court.[13] West Bend Insurance's brief in this court did not present or develop this issue of policy exclusions.

         ¶39 Having taken neither alternative course of action, West Bend Insurance has not preserved this issue for review as a matter of right.

         ¶40 In light of West Bend Insurance's failure to preserve the issue of policy exclusions as a matter of right, the court has three alternative courses of action it might take in the instant case: (1) The court may review the issue; (2) the court may decide West Bend Insurance has waived (forfeited) the right to a review of the issue; or (3) the court may remand the issue to the court of appeals for a review of the decision of the circuit court on the issue.[14]

         ¶41 Holding West Bend Insurance to have waived (forfeited) the application of its policy exclusions is especially apt in the instant case. The court should not decide the issue without briefs.[15] Nor should the court examine the briefs filed in the court of appeals on appeal from the circuit court in lieu of requiring briefs here. The order granting the petition for review explicitly states that if a party wishes to rely on any materials in its brief to the court of appeals, the material has to be restated in the brief filed in this court. Nor should the court order additional briefs here or remand the issue to the court of appeals. West Bend Insurance was fully cognizant of the policy exclusion issue and obviously decided not to raise it in this court. There is no compelling reason to give West Bend Insurance another kick at the can.[16]

         ¶42 Accordingly, we need address only whether West Bend has a duty to defend under the coverage provisions of the policy, namely the provisions regarding "property damage" and "occurrence" because that is the only issue raised and briefed by the parties in regard to the duty to defend.

         ¶43 We conclude that West Bend Insurance has a duty to defend under the coverage provisions of the policy, and that West Bend has forfeited or waived any argument it had that a policy exclusion excuses its duty to defend. Accordingly, we reverse the decision of the court of appeals and remand the cause to the circuit court for further proceedings not inconsistent with this decision.

         ¶44 To understand the legal issue regarding the duty to defend, we have to set the stage from the beginning. This litigation began shortly after Maya Elaine Smith purchased a residence in Milwaukee from the owner, Jeff Anderson, d/b/a Anderson Real Estate Services. After apparently discovering defects in the structure, including leaks in the basement, Smith, the plaintiff, sued Jeff Anderson, the defendant, asserting a claim for breach of contract and numerous claims for misrepresentation. Smith amended her complaint on January 27, 2014.

         ¶45 When we refer herein to the Smith complaint, we are referring to the amended Smith complaint. For purposes of this decision it would not matter whether we referred to the original Smith complaint or the amended complaint; they are substantially the same.[17] The amended complaint further develops factual allegations. The facts that are material to our analysis--that the basement leaked and the drain tiles were clogged, both of which require repair--appear in both complaints.

         ¶46 Jeff Anderson, the defendant in Smith's complaint, in turn sued (by means of a third-party complaint) 4th Dimension Design, Inc., an engineering firm, [18] and R&B Construction, a contractor, naming both as third-party defendants. Jeff Anderson, the third-party plaintiff, had contracted with these two firms to do work on the residence before the sale to Smith.

         ¶47 4th Dimension Design, Inc. inspected the residence, assessed the basement walls' structural integrity, and submitted a report to Jeff Anderson. Jeff Anderson then gave the report and engineering plans to the contractor, R&B Construction, with directions to implement 4th Dimension's recommendations and plans. According to Jeff Anderson's third-party complaint, R&B Construction, among other things, repaired the basement's walls, replaced drain tiles, installed a sump pump and sump crock, and provided warranties against faulty workmanship or materials for the basement repair and resolution of drainage issues.

         ¶48 Jeff Anderson's third-party complaint seeks contribution or indemnity from these two third-party defendants, should Jeff Anderson be held liable to Smith.[19] Contribution and indemnification seek to distribute liability among multiple actors that cause the same harm.

         ¶49 R&B Construction was insured under a Contractors Businessowners' Liability Policy with West Bend Insurance. This is a standard Commercial General Liability Policy ("CGL"), which "protects the insured against liability for damages the insured's negligence causes to third parties."[20]

         ¶50 R&B Construction tendered its defense in Anderson's third-party action to West Bend Insurance, its insurance company. West Bend Insurance intervened in the lawsuit.[21] It moved for summary judgment, asserting that it has no duty to defend R&B Construction because the Smith complaint and the Jeff Anderson third-party complaint do not allege property damage (as defined in the policy) caused by an occurrence (as defined in the policy). The circuit court granted summary judgment in favor of West Bend Insurance, concluding that West Bend Insurance had no duty to defend R&B Construction.

         ¶51 In deciding the instant case, we must examine both Smith's complaint and Anderson's third-party complaint, as did the parties, the circuit court, and the court of appeals.

         ¶52 After the circuit court ruled that West Bend Insurance had no duty to defend R&B Construction in Jeff Anderson's third-party complaint against R&B Construction, R&B Construction moved for summary judgment seeking dismissal of Jeff Anderson's third-party complaint against it. The circuit court denied this motion, seemingly suggesting that R&B Construction's negligent work at the residence may have caused the damage Smith claimed was caused by Jeff Anderson.

         ¶53 The circuit court's explanation for denying R&B Construction's motion for summary judgment against Jeff Anderson is as follows:

[T]here's some deviations which are significant in the design by 4-D of the basement walls. Now I'm not concluding that that is in fact the standard or that in fact their deviation, if there is one, would contribute to the condition of this faulty leaky basement. But it is a disputed fact.

. . . .

So with the evidence before the court, there's--and taking all inferences in favor of the defendant, I can't find that there's not a dispute of material fact. I think there is a dispute of material fact and the allocation of responsibility within or--negligence within which is allocated, I am not sure about at this juncture nor do I have to decide.

. . . .

I don't know that we have the facts today. But I wonder whether or not R&B shares responsibility, but we'll find that out through discovery I suspect.

         ¶54 R&B Construction stresses the disparity in the circuit court's rulings on the two summary judgment motions. R&B Construction interprets the circuit court as concluding, in R&B Construction Company's summary judgment motion against Jeff Anderson (the second summary judgment motion), that Anderson's third-party complaint stated a valid claim against R&B Construction for negligent or faulty work on the basement or drain tiles. R&B Construction further asserts that because such a claim against R&B Construction is the sort of claim that is covered by R&B Construction's policy, West Bend Insurance should have a duty to defend R&B Construction in Jeff Anderson's third-party complaint against R&B Construction and that West Bend Insurance should not have been relieved of any duty to defend R&B Construction.

         ¶55 R&B Construction filed a petition for leave to file an interlocutory appeal of the circuit court's denial of its motion for summary judgment against Jeff Anderson, but the court of appeals denied R&B Construction's petition. On R&B Construction's motion, the circuit court has stayed all proceedings in the instant case pending before it.

         ¶56 In the instant case, the court of appeals refused to consider the circuit court's order denying R&B Construction's motion for summary judgment against Jeff Anderson (the second summary judgment motion). The court of appeals declared that that order was not before it.[22]

         ¶57 Similarly, the circuit court's order denying R&B Construction's motion for summary judgment against Jeff Anderson (the second summary judgment) is not before this court. The only order before us is the order in favor of West Bend Insurance against R&B Construction on the issue of whether West Bend Insurance has a duty to defend R&B Construction in Jeff Anderson's third-party complaint against it.

         ¶58 The basic issue presented is whether Jeff Anderson's third-party complaint against R&B Construction (to which Smith's complaint against Jeff Anderson is attached) states a claim that West Bend Insurance had a duty to defend R&B Construction. The answer to this question depends on several rules and principles of law that we shall address on the way to reversing the decision of the court of appeals and concluding that West Bend Insurance has a duty to defend R&B Construction in the third-party action. We remand the cause to the circuit court for further proceedings not inconsistent with this decision. I

         ¶59 The first issue of law we address is the standard of review of the circuit court order granting summary judgment to West Bend Insurance. We then set forth the four-corners rule used to determine whether West Bend Insurance has a duty to defend its insured. We then examine rules for interpreting complaints and insurance policies, and principles applicable to contribution and indemnification.

         ¶60 When we review a circuit court order granting summary judgment, we apply the same standard of review and methodology as that used by the circuit court.[23] Summary judgment is appropriate when there is no issue of material fact and the moving party is entitled to judgment as a matter of law.[24]

         ¶61 When no extrinsic evidence is admitted on the motion for summary judgment (and none is considered in the instant case), the interpretation of an insurance policy, including the duty to defend, is a question of law that this court determines independently of the circuit court or the court of appeals while benefiting from their analyses.[25]

         ¶62 In determining whether an insurance company has a duty to defend its insured, the court applies the four-corners rule.[26]Under the four-corners rule, the court determines an insurance company's duty to defend its insured by comparing the terms of the insurance policy to the allegations of the complaint. "The insurer's duty arises when the allegations in the complaint coincide with the coverage provided by the policy."[27] Thus, "[i]f the [factual] allegations in the complaint, construed liberally, appear to give rise to coverage, insurers are required to provide a defense until the final resolution of the coverage question by a court."[28] The proper application of the four-corners rule presents a question of law that the court decides independently of the determinations rendered by the circuit court and court of appeals.[29]

         ¶63 In applying the four-corners rule in the instant case, the court is guided by the following ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.