COURT OF APPEALS DECISION DATED AND RELEASED August 8, 1995 |
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. 94-3032
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT I
COL D'VAR GRAPHICS,
INCORPORATED,
a Wisconsin
corporation,
Plaintiff-Co-Appellant,
STATE FARM GENERAL
INSURANCE CO.,
a foreign corporation,
GARY E. SKINNER,
individually and
NIKI KARP,
individually,
Plaintiffs,
v.
FORRESTER ENTERPRISES,
INC.,
a Wisconsin
corporation, d/b/a
ANCHOR MOVING SYSTEMS,
Defendant-Appellant,
THE HOME INSURANCE
COMPANY,
a foreign corporation
and
UNITED STATES FIDELITY
AND
GUARANTY COMPANY
(USF&G),
a foreign corporation,
Defendants-Respondents,
FIREMAN'S FUND
INSURANCE COMPANY,
a foreign corporation,
Defendant.
APPEAL from a judgment
of the circuit court for Milwaukee County:
JOHN E. McCORMICK, Judge. Affirmed.
Before Wedemeyer, P.J.,
Sullivan and Schudson, JJ.
WEDEMEYER, P.J. Forrester Enterprises, Inc., appeals from a
judgment concluding that the coverage provided under its insurance policy
issued by The Home Insurance Company, is limited to physical damage that
occurred to Col D'Var Graphics, Inc.'s machinery and does not provide coverage
for incidental or consequential damages.
Forrester claims that
the trial court erred as a matter of law in concluding that Home's
warehouseman's policy did not cover incidental and consequential damages
resulting from the physical property damage.
Forrester also claims that the trial court erred in determining the
coverage question on a post-verdict motion.
Because Home's warehouseman's policy clearly and unambiguously provides
only for coverage for damage or loss of property, and because the trial court
did not err in determining coverage after the rendering of the jury verdict, we
affirm.
I. BACKGROUND
Col D'Var Graphics,
hired Forrester (doing business as Anchor Moving Systems) to move some of its
printing and typesetting equipment from one place of business to another. Some of the equipment was damaged during the
move. Col D'Var sued Forrester claiming
that Forrester was responsible for both the physical damage to the property and
for damages due to business interruption.
Forrester notified its insurance carrier, Home. Home agreed to defend Forrester, but
reserved the right to contest coverage.
On the day before trial,
(three years after the initial occurrence of damages), Home attempted to raise,
for the first time, the issue of coverage.
At the pretrial conference which was not transcribed, the trial court
denied Home's attempt to raise the coverage issue at trial. The jury awarded Col D'Var $96,000 as
compensation for business interruption loss, $58,528 for “out-of-pocket
losses,” and $21,667.76 plus $55,935.64 for property damage.
Home filed a
post-verdict motion for a declaratory judgment on insurance coverage. Home claimed the policy did not cover
incidental and consequential damages flowing from the physical damage to the
printing equipment. Forrester responded
that Home's policy did provide coverage for all the damages awarded by the jury
and that Home's motion was procedurally improper. Both parties agree that the language of the policy is clear and
unambiguous. Nevertheless, they each
reach diametrically opposed conclusions as to the effect of the language.
The trial court granted
Home's motion, determining that Home and Forrester were jointly and severally
liable for the property damages awarded by the jury, but that Forrester alone
was responsible for the damages the jury awarded for out-of-pocket losses and
business interruption losses. Forrester
now appeals.
II. DISCUSSION
A. The
Coverage Question.
Forrester first claims
the trial court erred in granting Home's post-verdict motion because the policy
provided coverage for all damages resulting from its liability to Col
D'Var. Forrester's contention is based
on three considerations:
(1) public policy favors a finding of coverage; (2) the plain
meaning of the policy in question provides coverage for the entire jury award;
and (3) in the alternative, if the terms of the policy are ambiguous, the
policy must be construed against Home and in favor of coverage.
STANDARD OF REVIEW
Whether an insurance
policy provides coverage is a question of law which we decide de novo. See Lechner v. Scharrer,
145 Wis.2d 667, 672, 429 N.W.2d 491, 494 (Ct. App. 1988). When interpreting an insurance policy, this
court must construe the policy as it is understood by a reasonable person in
the position of the insured. Bulen
v. West Bend Mut. Ins. Co., 125 Wis.2d 259, 263, 371 N.W.2d 392, 394
(Ct. App. 1985). While we must construe
exceptions that tend to limit liability strictly against the insurer, strict
construction does not permit strained construction. Id. at 264, 371 N.W.2d at 394.
As with a contract, the
objective in interpreting and construing an insurance policy is to ascertain
the true intentions of the party. Home
Mut. Ins. Co. v. Insurance Co. of North America, 20 Wis.2d 48, 51,
121 N.W.2d 275, 277 (1963). The policy
is to be considered as a whole in order to give each of its provisions the
meaning intended by the parties. Laabs
v. Chicago Title Ins. Co., 72 Wis.2d 503, 511, 241 N.W.2d 434, 438-39
(1976). This exercise may include
placing the questionable language in the context of the policy, and examining
the purpose and subject matter of the insurance. Swart v. Rural Mut. Ins. Co., 117 Wis.2d 478, 482,
344 N.W.2d 719, 720-21 (Ct. App. 1984).
The language of a policy will be considered ambiguous only after all of
the rules of construction are exhausted.
Hemerley v. American Family Mut. Ins. Co., 127 Wis.2d 304,
309, 379 N.W.2d 860, 863 (Ct App. 1985).
If the terms of a policy are not ambiguous, we shall simply apply those
terms rather than engage in construction.
Leverence v. United States Fidelity & Guar., 158
Wis.2d 64, 73, 462 N.W.2d 218, 222 (Ct. App. 1990).
LANGUAGE OF THE POLICY
We first examine the
language of the policy which forms the basis of this dispute. The Home insurance contract entitled
“Furniture Warehousemen's Policy” includes the following relevant language:
DESCRIPTION OF COVERAGE & INSURING
CONDITIONS.
Subject to the terms of this policy, this
Company agrees:
TO PAY ON BEHALF OF THE INSURED ALL SUMS
WHICH THE INSURED SHALL BECOME LEGALLY OBLIGATED TO PAY BECAUSE OF LIABILITY,
either imposed on or assumed by the Insured:
COVERAGE I
As a Warehouseman or Bailee for loss or
destruction of or damage to personal property of others, including but not
limited to Freighters, Forwarders, other Motor Carriers, Individual shippers
and branches of the Federal or State Government, accepted for storage, packing,
crating (or other preparation for shipment) or while being held as
Storage-In-Transit for other Freight Forwarders and other Motor Carriers
occurring at the locations listed in this policy.
COVERAGE 2
As a
Carrier for physical loss or damage to Household Goods, General Merchandise and
electronic or data processing equipment while in the custody or control of the
Insured in the ordinary course of transit, including but not limited to
packing, unpacking, moving hoisting or rigging, and skidding or palletising or
while being held as Storage-In-Transit.
1. Public Policy.
Forrester first asserts
that public policy favors and requires us to conclude that there is coverage
for the jury's award of damages. We are
not convinced.
As our supreme court has
stated in Cieslewicz v. Mutual Service Casualty Insurance Co., 84
Wis.2d 91, 103, 267 N.W.2d 595, 601 (1978), “‘[p]ublic policy’ is no magic
touchstone.” More than one public
policy exists. Id. Included in the menu of public policies is
the policy to favor freedom of contract.
Id. A species of
this general policy is the right of an insurer to limit liability by the terms
of its contract unless it is prohibited by statute, case law, or sound
considerations of public policy. Resseguie
v. American Mut. Liab. Ins. Co., 51 Wis.2d 92, 101, 186 N.W.2d 236, 241
(1971).
Forrester correctly
asserts that “[p]ublic policy in Wisconsin favors finding coverage when the
insurance policy terms permit it.” Newhouse
v. Laidig, Inc., 145 Wis.2d 236, 242, 426 N.W.2d 88, 91 (Ct. App.
1988). Nevertheless, Forrester has
failed to adequately develop its public policy argument and this court is not
obligated to entertain an underdeveloped argument which provides neither a
factual context nor legal authority. See
Reiman Assocs., Inc. v. R/A Advertising, Inc., 102 Wis.2d 305,
306 n.1, 306 N.W.2d 292, 294 n.1 (Ct. App. 1981). Thus, Forrester's public policy argument fails.
2. Plain
Meaning.
Next, Forrester claims
that the plain meaning of Home's policy language provides coverage for the
entire jury award. Forrester argues
that a reasonable insured would understand Home's policy to mean what it says,
i.e., it would pay “all sums which the insured shall become legally obligated
to pay because of liability.”
Amplifying, Forrester states, “it is reasonable to interpret Home's
policy to cover consequential damages.
Forrester is legally obligated to pay because of Forrester's liability
resulting from physical damages” to the equipment of Col D'Var. Forrester further argues, “[t]he only condition
precedent to Home's obligation to pay is that Forrester's liability must arise
from the physical loss or damage to the property of others.” Forrester's argument fails because it is
based on a misreading of the Home policy.
The basis for Forrester's
argument appears to be the introductory language to the contractual agreement
to insure, i.e., “this company agrees: to pay on behalf of the insured all sums
which the insured shall become legally obligated to pay because of liability
....” Forrester equates this language
to the scope of coverage undertaken by Home.
Relying solely on this language, Forrester argues that the only
condition precedent to Home's obligation to pay is that Forrester's liability
must arise from physical loss or damage to the property of others.
Forrester's argument is
alluring, but illusionary, and suffers from the malady of oversimplification by
ignoring the language following the introduction. By the plain terms of the policy language, Home agreed, “subject
to the terms of this policy,” to pay all sums for which it shall be legally
liable. As relates to this case, two of
the five categories of coverage appear to be germane: Coverage one which obliges Home to pay, on behalf of the insured,
“as a warehouseman or bailee for loss or destruction of or damages to
personal property of others;” or Coverage two which obligates Home to pay
on behalf of its insured “as a carrier for physical loss of damage to”
personal property. (Emphasis
added).
Regardless of which
category of coverage applies, the coverage is clearly “for” physical loss and
destruction of property. In the
Declaration pages of the policy, we note that “insurance is provided under this
policy only for coverages ....”
The language of the insuring agreement upon which Forrester bases its
entire agreement is the promise of Home to pay, subject to the terms of this
policy, for damages that are covered in the insurance section of the policy.
When the language of the
policy is viewed in the context of its insured's interest and its purpose, the
scope of coverage is made manifest.
Forrester was in the business of moving and storage. The policy is designed to provide protection
for warehousemen and carriers such as Forrester for the loss, damage or
destruction of property over which it assumes care and custody. Here Home's policy sets forth a description
of the type of goods that are insured, deductions from property loss and the
method of property evaluation should coverage be activated. Coverage is limited. There is no language evincing an intent to
cover economic, consequential or other non-physical damage.[1] The language does not extend coverage to any
and all damages resulting from the damages to or loss of property. Rather, it provides coverage only for
damage to the property.
We conclude that the
language of the policy is clear and unambiguous; that Home agreed to pay all
damages that Forrester is “legally obligated to pay for the coverage as
described,” and that the applicable coverages described are only “for” physical
damage to certain property. We further
conclude that in the context of the purpose of the policy and the nature of its
constituent elements, no reasonable insured would expect coverage of all
damages resulting from any property damage.
3. Ambiguous
Language Construed Against Home.
Because we have
concluded that the language is unambiguous, it is not necessary for us to
address Forrester's alternative argument.
See Gross v. Hoffman, 227 Wis. 296, 300, 277 N.W.
663, 665 (1938) (only dispositive issue need be addressed).
B. Procedural
Issue.
Forrester also claims
that the trial court erred in ruling on the coverage issue by post-verdict
motion. Forrester, citing Allstate
Insurance Co. v. Charneski, 16 Wis.2d 325, 331, 114 N.W.2d 489, 492
(1962), argues that proper procedure demands that a trial on coverage
occur. We disagree.
Although Wisconsin case
law provides an insurer with an option to litigate the coverage issue before
the underlying claim, this procedure arises primarily in the context of whether
an insurer has a duty to defend. See
Elliott v. Donahue, 169 Wis.2d 310, 318, 485 N.W.2d 403, 406
(1992). The duty to defend was not at
issue in the instant case. Home
acknowledged its duty to defend from the very beginning of this lawsuit. Home challenges only whether its duty to
indemnify extends to consequential damages.
Hence, the case law that Forrester relies on is inapposite.
Our statutes provide
guidance for the situation presented in the instant case—that is, when an
insurer has an obligation to defend, even though the case may involve damages
that are not covered by the policy.
Section 803.04(2)(b), Stats.,
provides:
If an
insurer is made a party defendant pursuant to this section and it appears at
any time before or during the trial that there is or may be a cross issue
between the insurer and the insured or any issue between any other person and
the insurer involving the question of the insurer's liability if judgment
should be rendered against the insured, the court may, upon motion of any
defendant in the action, cause the person who may be liable upon such cross
issue to be made a party defendant to the action and all the issues involved in
the controversy determined in the trial of the action.... Nothing herein contained shall be construed
as prohibiting the trial court from directing and conducting separate trials on
the issue of liability to the plaintiff or other party seeking affirmative
relief and on the issue of whether the insurance policy in question affords
coverage. Any party may move for such
separate trials and if the court orders separate trials it shall specify in its
order the sequence in which such trials shall be conducted.
Accordingly, whether the
cross issue of coverage should be decided within the context of the liability
trial or in a separate trial is left to the discretion of the trial court. Section 803.04(2)(b), Stats.
Section 803.04(2)(b) clearly provides the trial court with the authority
to decide the coverage question within the context of the liability trial. Our review of this issue, therefore, is
limited to whether the trial court erroneously exercised its discretion. Village of Shorewood v. Steinberg,
174 Wis.2d 191, 204, 496 N.W.2d 57, 62 (1993).
We conclude that the
trial court did not erroneously exercise its discretion in deciding the
coverage issue by post-verdict motion because: (1) interpreting the policy to
reach a coverage determination is a question of law, see Just v.
Land Reclamation, Ltd., 155 Wis.2d 737, 744, 456 N.W.2d 570, 572, modified,
157 Wis.2d 507, 456 N.W.2d 570 (1990); and (2) there were no unresolved factual
issues pertinent to the coverage determination. Therefore, a separate trial on the coverage question would have
been a waste of time. The only factual
issues had already been resolved in the liability trial: (1) the jury decided that Forrester's
conduct resulted in property damage and in consequential damages; and
(2) the jury decided the amounts of these damages. Thus, the only unresolved issue was whether
the policy provides coverage for property damage alone or for both property
damage and consequential damages. This
issue is a question of law that does not require a trial to resolve. Given these circumstances, it was
appropriate for the trial court to decide the coverage question by post-verdict
motion. Based on the foregoing, the
trial court did not erroneously exercise its discretion in deciding the
coverage issue within the context of the liability trial.[2]
By the Court.—Judgment
affirmed.
Not recommended for
publication in the official reports.
[1] See Gonzalez v. City of Franklin, 137 Wis.2d 109, 122, 403 N.W.2d 747, 752 (1987) (the terms of an unambiguous insurance policy should not be rewritten by construction to bind an insurer to a risk it never contemplated).
[2] Moreover, Forrester's
request that this case be remanded for further discovery is without merit. Because we have concluded that the language
of the policy is clear and unambiguous, there are no factual disputes that
require additional discovery.
We also reject Forrester's contention that Home waived its right to contest coverage. The earliest pleadings filed by Home affirmatively alleged that “said policy of insurance is subject to all of its terms, conditions, provisions and limitations contained therein.” In addition, it is undisputed that Home defended the underlying claim pursuant to a reservation of rights. Further, prior to trial, Home again raised the coverage issue with respect to certain types of damages.