PUBLISHED
OPINION
Case No.: 94-3017
† Petition
for Review Filed.
Complete Title
of Case:
MARYLAND CASUALTY COMPANY,
Plaintiff,
v.
EVAN BEN-HUR,
Defendant,
RUSSELL J. BUDZISZ
and EDWARD J. WRUCK, d/b/a
BUDZISZ-WRUCK & ASSOCIATES
and UTICA MUTUAL INSURANCE COMPANY,
Defendants-Third Party Plaintiffs-Appellants-
Cross Respondents, †
v.
EMPLOYERS REINSURANCE CORPORATION,
Third Party Defendant-Respondent-
Cross Appellant.
Submitted on Briefs: July
11, 1995
Oral Argument: ---
COURT COURT
OF APPEALS OF WISCONSIN
Opinion Released: July
16, 1996
Opinion Filed: July 16, 1996
Source of APPEAL Appeal
and Cross-Appeal from a judgment
Full Name JUDGE COURT: Circuit
Lower Court. COUNTY: Milwaukee
(If "Special", JUDGE: MICHAEL J. BARRON
so indicate)
JUDGES: Sullivan,
Fine and Schudson, JJ.
Concurred:
Dissented: Schudson, J.
Appellant
ATTORNEYSFor the
defendants-third party plaintiffs-appellants-cross respondents Russell J.
Budzisz and Edward J. Wruck d/b/a Budzisz-Wruck & Associates and Utica
Mutual Insurance Company the cause was submitted on the briefs of Burton A.
Strnad of Burton A. Strnad, S.C., of Milwaukee.
Respondent
ATTORNEYSFor the
third party defendant-respondent-cross appellant Employers Reinsurance
Corporation the cause was submitted on the briefs of Christine K. Nelson
of Christine K. Nelson, S.C., of Brookfield.
COURT OF APPEALS DECISION DATED AND RELEASED July 16, 1996 |
NOTICE |
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62, Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 94-3017
STATE
OF WISCONSIN IN COURT OF
APPEALS
MARYLAND CASUALTY
COMPANY,
Plaintiff,
v.
EVAN BEN-HUR,
Defendant,
RUSSELL J. BUDZISZ
and EDWARD J. WRUCK,
d/b/a
BUDZISZ-WRUCK &
ASSOCIATES
and UTICA MUTUAL
INSURANCE COMPANY,
Defendants-Third Party Plaintiffs-Appellants-
Cross Respondents,
v.
EMPLOYERS REINSURANCE
CORPORATION,
Third Party Defendant-Respondent-
Cross Appellant.
APPEAL and CROSS-APPEAL
from a judgment of the circuit court for Milwaukee County: MICHAEL J. BARRON,
Judge. Affirmed.
Before Sullivan, Fine
and Schudson, JJ.
SULLIVAN,
J. Russell J. Budzisz and Edward J. Wruck, d/b/a Budzisz-Wruck &
Associates (Budzisz‑Wruck), and their errors and omissions insurer, Utica
Mutual Insurance Company, appeal from a summary judgment dismissal of their third-party
complaint against Employers Reinsurance Corporation (ERC), Budzisz‑Wruck's
prior errors and omissions insurer. ERC
cross-appeals from the judgment, which also denied ERC's motion for frivolous
trial costs under § 814.025, Stats.
At issue is whether,
under the terms of the ERC “claims made” policy, a claim was made during ERC's
policy period. The trial court
concluded that a claim was not made during ERC's policy period and granted
summary judgment. We agree with the
trial court. We also agree with the
trial court that Budzisz‑Wruck and Utica's claim was not frivolous. Accordingly, the judgment is affirmed.
I. Background.
The following facts are
presented in the summary judgment materials.
Maryland Casualty Company insured Evan and Kim Ben-Hur's home. The homeowner's policy had been applied for
through Budzisz‑Wruck. In the
second year of the policy, on March 1, 1992, Evan Ben-Hur set fire to the
home. Maryland Casualty paid a
$265,324.02 settlement on that claim.
Evan Ben-Hur was federally prosecuted and convicted in the arson.
Maryland Casualty sued
Ben-Hur to recoup the money it paid out in the claim, and joined Budzisz‑Wruck,
alleging that its agent was both negligent and violated fiduciary duties owed
to Maryland Casualty. Maryland Casualty
alleged that Budzisz‑Wruck failed to list the previous losses of the
Ben-Hurs when Budzisz‑Wruck submitted their application for a homeowner's
policy with Maryland Casualty. Maryland
Casualty also joined Utica Mutual, Budzisz‑Wruck's current errors and
omissions carrier.
Utica Mutual provided
coverage to Budzisz‑Wruck beginning September 6, 1992. ERC was Budzisz‑Wruck's prior errors
and omissions insurer and its “claims made” policy coverage ended at
12:01 a.m. on September 6, 1992.
The ERC policy insured
against claims first made against Budzisz‑Wruck during the policy
period. The policy provided in relevant
part:
COVERAGE. The Corporation does hereby agree to pay on
behalf of the Insured such loss in excess of the applicable deductible stated
and within the limit of liability specified in the Declarations sustained by
the Insured by reason of liability imposed by law for damages caused by:
(a) any negligent
act, error or omission of the Insured or any person for whose acts the Insured
is legally liable, or
(b) any claim for
libel or slander or invasion of privacy against the Insured,
arising out of the conduct of the
business of the Insured in rendering services for others as a general insurance
agent, insurance agent or insurance broker,
and including activities as an insurance consultant or notary public and
any advertising activities, as respects claims first made against the Insured
during the policy period.
“Claims first made” was
defined in the policy as:
(c) the term
“claims first made” shall mean that the Insured has received notice of legal
process, that a demand for money or services has been made against the Insured,
or that the Insured has become aware of a proceeding, event or development
which has resulted in or could in the future result in the institution of a
claim against the Insured. In the event
of any such proceeding, event or development, notice must be to the Corporation
during the policy period.
The controversy in this
case surrounds the “claims first made” provision of the ERC policy. On August 24, 1992, Maryland Casualty
prepared a claim for the fire loss and posted it from Baltimore, Maryland, via
certified mail to Budzisz‑Wruck on September 2, 1992. Budzisz‑Wruck received the claim on
September 8, 1992, as indicated by receipt stamps on the letter and
envelope. Upon receipt of the claim,
Budzisz‑Wruck faxed and mailed copies to Utica Mutual.
After the commencement
of Maryland Casualty's action against Budzisz‑Wruck, Utica Mutual
admitted coverage under the errors and omissions policy it issued to Budzisz‑Wruck. Utica Mutual and Budzisz‑Wruck then
commenced the third-party action against ERC, alleging that ERC's policy with
Budzisz‑Wruck was effective when Maryland Casualty made its claim. ERC answered, denying that the claim was
made during the policy period.
The trial court granted
summary judgment dismissal to ERC, concluding that under the terms of its
policy with Budzisz‑Wruck, Maryland Casualty's claim was not made during
the policy period because Budzisz-Wruck had not received the claim until
September 8, 1992. Budzisz‑Wruck
and Utica Mutual now appeal from that judgment.
II. Analysis.
The issue in this case
is one of first impression in this state concerning “claims made”
policies. We conclude, however, that
the clear language of the ERC policy controls; thus, our analysis is quite
straightforward.
In summary judgment
cases, we employ a “methodology” identical to that applicable in the trial
court. This “methodology” has been
oft-repeated and we need not do so here.
E.g., Grams v. Boss, 97 Wis.2d 332, 338‑39,
294 N.W.2d 473, 476‑77 (1980). We
do note, however, that our review of the trial court's ruling is de novo. Bay View Packing Co. v. Taff,
198 Wis.2d 654, 673, 543 N.W.2d 522, 528 (Ct. App. 1995).
A. “Claims Made”
Policy.
At issue is the
construction of ERC's “claims made” policy with Budzisz‑Wruck. A “claims made” policy insures for negligent
acts, “including those occurring prior to the policy's effective date, as long
as the claim is made during the policy period.” Chalk v. Trans Power Mfg., Inc., 153 Wis.2d 621,
624 n.1, 451 N.W.2d 770, 772 n.1 (Ct. App. 1989). This differs from the more common “occurrence” policy, which
“provides insurance for acts occurring during the policy period, even though
the claim may not be asserted until long after the policy had expired.” Id.
“[T]he construction of
the words and clauses in an insurance policy is a question of law for the
court.” Katze v. Randolph &
Scott Mut. Fire Ins., 116 Wis.2d 206, 212, 341 N.W.2d 689, 691
(1984). Further, we are guided by the “same
rules of construction as are applied to contracts generally.” Kremers-Urban Co. v. American
Employers Ins., 119 Wis.2d 722, 735, 351 N.W.2d 156, 163 (1984).
The objective in interpreting and
construing a contract is to ascertain and carry out the true intention of the
parties. The words of an insurance
contract are to be construed in accordance with the principle that 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.... Language in an insurance contract is to be
given the common and ordinary meaning it would have in the mind of a lay
person. Words or phrases in a contract
are ambiguous when they are fairly susceptible to more than one construction.... Where no ambiguity exists in the terms of
the policy, we will not engage in construction, but will merely apply the
policy terms.
Id.,
119 Wis.2d at 735‑36, 351 N.W.2d at 163 (citations omitted).
Hence, the issue we
address in this case is whether Maryland Casualty's claim was made within the
terms of ERC's policy language. ERC
argues that Budzisz‑Wruck, ERC's insured under the policy, did not
receive notice of Maryland Casualty's claim until September 8, 1992, after
ERC's policy period terminated at 12:01 a.m. on September 6, 1992. Consequently, ERC argues that under the
unambiguous terms of its policy, the claim was not made during the policy
period; hence, there is no coverage under the policy. Budzisz‑Wruck and Utica Mutual also argue that the relevant
terms of the ERC policy are unambiguous.
They argue, however, that these policy terms unambiguously provide that
a demand only be made, not received. In
the alternative, they argue that if the policy term is found to be ambiguous,
this court should construe the policy in their favor, apply the “mail-box”
rule, and conclude that Maryland Casualty's claim was made when it was posted
on September 2, 1992, within the ERC policy period.
As stated above, we need
only look to the terms of the ERC policy to resolve this issue. The policy only provides coverage for
“claims first made against the Insured during the policy period.” The policy defines “claims first made” as
meaning: (1) “that the Insured has received notice of legal process,”
(2) “that a demand for money or services has been made against the
Insured,” or (3) “that the Insured has become aware of a proceeding, event
or development which resulted in or could in the future result in the
institution of a claim against the Insured.”
The dispute in this case surrounds the second option, “that a demand for
money or services has been made against the Insured.” We conclude that this phrase is unambiguous and supports ERC's
argument.
A common sense reading
of the plain language of this phrase leads to only one reasonable
conclusion—that the insured must have notice of the “demand for money or
services” for the claim to be made. As
another jurisdiction has concluded when construing an identical ERC policy—for
the term “demand” “[t]o have a meaning, this act must have an audience.” Safeco Surplus Lines Co. v. Employer's
Reinsurance Corp., 15 Cal. Rptr.2d 58, 60 (Cal. Ct. App. 1992).[1] Thus, for the demand to be “made,” the
insured must be in possession of the demand.
Hence, it must be received.
Under the dissent's interpretation of the clause “that a demand for
money or services has been made against the Insured,” the insured would never
have to know of the demand for the “claim” against it to have been “made”; a
whisper into the wind or, more realistically, a letter mailed but never
received would suffice. As Safeco
Surplus Lines indicates, a “demand,” to be effective, “must have an
audience.” Id.
Because we conclude the
policy language is not ambiguous, we need only to apply policy terms to resolve
this appeal. Kremers-Urban Co.,
119 Wis.2d at 736, 351 N.W.2d at 163.
The parties do not dispute that Budzisz‑Wruck did not receive
Maryland Casualty's claim until September 8, 1992. Further, it is undisputed that the ERC policy period ended at
12:01 a.m. on September 6, 1992. Under
the plain language of the policy, Maryland Casualty's claim was not made to
Budzisz‑Wruck until after ERC's policy terminated; ERC no longer provided
coverage to Budzisz‑Wruck or had a duty to defend. The trial court properly granted summary
judgment dismissal to ERC.
B. Cross-Appeal.
Further, ERC
cross-appeals the trial court's judgment denying its motion for costs as
provided by § 814.025, Stats.[2] Whether an attorney or litigant has a
reasonable basis in law or equity for commencing or continuing an action, is a
mixed question of fact and law. Stoll
v. Adriansen, 122 Wis.2d 503, 513, 362 N.W.2d 182, 187 (Ct. App.
1984). Because the facts are undisputed,
an issue of law is presented. The trial
court determined that Utica Mutual did not know that its claim was without any
reasonable basis in law or equity.
Further, the issue had not been addressed by a Wisconsin appellate
court. Hence, the trial court properly
concluded
that
Budzisz‑Wruck and Utica Mutual could not know the action was without a
reasonable basis in law. ERC's motion
was properly denied.
By the Court.—Judgment
affirmed.
No. 94-3017 (D)
SCHUDSON, J. (dissenting). The appellants argue that while the policy
requires that a notice of legal process be “received” to be deemed a “claim[]
first made,” the policy does not require that “a demand for money” be received. Thus, they contend, they prevail under the
policy's unambiguous terms. The
appellants are correct.
The policy provides that
“the term ‘claims first made’ shall mean ... that a demand for money or
services has been made against the Insured.”
The majority, in effect, re-writes this provision stating that “[a]
common sense reading of the plain language of this phrase leads to only one
reasonable conclusion—that the insured must have notice of the ‘demand
for money or services’ for the claim to be made.” Majority slip op. at 8 (emphasis added).
Why? On what basis does the majority add “must
have notice”—an apparent requirement that the insured receive the demand
for money—in the absence of any policy language requiring that? The majority does not explain. On what basis does the majority add “must
have notice” when, in the preceding clause of the policy, a “has received
notice” requirement is included. Does
the majority believe the drafters simply forgot to include this requirement in
the next clause? The majority does not
explain.
The appellants also
argue that if the policy is ambiguous, it should be construed to support
their position. The appellants cite
substantial Wisconsin authorities applying the “mail-box” rule to a variety of
cases with at least some similarities to the circumstances and policy concerns
of this case. As the appellants
explain, a date of mailing often is more definitive and less subject to
misrepresentation that a date of receipt.
Moreover, as the appellants contend, if this policy is ambiguous, it
should be construed against ERC, the drafter.
I conclude that the
appellants have presented prevailing arguments under both their “unambiguous
policy” and “ambiguous policy” theories.
The majority has reached its conclusion by re-writing the policy and
inexplicably adding dispositive terms.
Accordingly, I respectfully dissent.
[1] Although we reach our conclusion in this case solely on the plain meaning of the policy provision, we do note that the one other jurisdiction cited by the parties that has addressed this identical issue arising out of an ERC policy reached the same result that we do. Safeco Surplus Lines Co. v. Employer's Reinsurance Corp., 15 Cal. Rptr.2d 58, 58‑59 (Cal. Ct. App. 1992) (concluding claim is not made under ERC policy until it has been received).
[2] Section 814.025, Stats., provides in relevant part:
(1) If
an action or special proceeding commenced or continued by a plaintiff ... is
found, at any time during the proceedings or upon judgment, to be frivolous by
the court, the court shall award to the successful party costs determined under
s. 814.04 and reasonable attorney fees.
....
(3) In
order to find an action ... to be frivolous under sub. (1), the court must find
one or more of the following:
(b) The party or the party's attorney knew, or should have known, that the action ... was without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification or reversal of existing law.