COURT
OF APPEALS DECISION DATED AND RELEASED FEBRUARY 6, 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(1), Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 95-1310
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT III
MANDI MADOCHE,
Plaintiff-Respondent,
v.
MILWAUKEE MUTUAL INSURANCE
COMPANY, THE MANITOWOC
COMPANY, JOHN and KIMBERLY
SELVICK and JOHN DOE
INSURANCE COMPANY,
Defendants-Respondents,
WILSON MUTUAL INSURANCE
COMPANY,
Intervening
Defendant-Appellant,
HANS SCHMIDT AND AMERICAN
FAMILY MUTUAL INSURANCE
COMPANY,
Defendants-Third
Party
Plaintiffs-Respondents,
v.
ROBERT G. BABCOCK,
Third
Party Defendant-Respondent,
--------------------------------------------------------------------------------------------------------------------------
ROBERTA SCHMIDT,
Plaintiff-Respondent,
v.
ROBERT G. BABCOCK, MILWAUKEE
MUTUAL INSURANCE COMPANY,
OVERLAND-BOLLING COMPANY and
JOHN and KIMBERLY SELVICK,
D/B/A THE MIAMI TAP,
Defendants-Respondents,
WILSON MUTUAL INSURANCE
COMPANY,
Defendant-Appellant.
-------------------------------------------------------------------------------------------------------------------------
HANS A. SCHMIDT,
Plaintiff-Respondent,
v.
ROBERT G. BABCOCK,
JOHN and KIMBERLY SELVICK
D/B/A THE MIAMI TAP,
MILWAUKEE SAFEGUARD INSURANCE
COMPANY, BROWNING-FERRIS
INDUSTRIES, INC., and
AMERICAN STANDARD INSURANCE
COMPANY OF WISCONSIN,
Defendants-Respondents,
WILSON MUTUAL INSURANCE
COMPANY,
Defendant-Appellant.
APPEAL from an order of
the circuit court for Kewaunee County:
DENNIS J. MLEZIVA, Judge. Reversed
and cause remanded.
Before Cane, P.J.,
LaRocque and Myse, JJ.
CANE, P.J. Wilson Mutual Insurance Company appeals a
nonfinal order denying portions of its motions for declaratory and summary
judgment seeking to be dismissed from its duty to defend and indemnify its
insureds, John and Kimberly Selvick. We
granted leave to appeal the nonfinal order pursuant to § 808.03(2), Stats.
This case arose out of a
two-car accident involving driver Robert
Babcock and his passenger, Mandi Madoche, and driver Hans Schmidt and
his passenger, Roberta Schmidt.
Plaintiffs Madoche and the Schmidts allege that Babcock's vehicle
negligently collided with the Schmidt vehicle.
They also allege that Babcock, who was under the legal drinking age, was
driving while under the influence of alcohol.
The plaintiffs further allege that the Selvicks and/or their agents
negligently sold or dispensed alcohol to Babcock and that this negligence was a
substantial factor in causing the collision.
It
is undisputed that Wilson issued a storekeeper's liability insurance policy
insuring "JOHN SELVICK D/B/A MIAMI'S" and that the policy was in full
force and effect on the date of the car accident.[1] In response to Wilson's motions for
declaratory and summary judgment, the trial court concluded that: (1) Exclusion (h) of the storekeeper's
policy is ambiguous and should therefore be construed in favor of the insured;
(2) Wilson has a duty to defend its insured; (3) issues of fact prevent the
court from concluding whether Wilson has a duty to indemnify John and Kimberly
Selvick; (4) no product hazard coverage applies nor is there any responsibility
to defend or indemnify with respect to product hazard; and (5) there is no
coverage for punitive damages. Wilson
appeals the trial court's conclusions regarding the ambiguity of exclusion (h)
and Wilson's duty to defend and indemnify; the respondents have not
cross-appealed the product hazard or punitive damage issues.
However, the respondents
argue Wilson is liable to defend and indemnify the Selvicks because exclusion
(h) of the storekeeper's policy is ambiguous.
Additionally, plaintiff Roberta argues there is coverage under another
section of the policy: the products
hazard endorsement. Roberta argues alternatively
that if there is no products hazard coverage, Wilson should nonetheless provide
coverage because the products hazard endorsement is illusory and
ambiguous. For the reasons discussed
herein, we reverse the trial court's order denying summary judgment.
When we review a
decision to grant or deny summary judgment, we apply the same methodology as
the trial court. Ollhoff v. Peck,
177 Wis.2d 719, 722, 503 N.W.2d 323, 324 (Ct. App. 1993). The first step of that methodology requires
the court to examine the pleadings to determine whether a claim for relief has
been stated and a material issue of fact presented. Voss v. City of Middleton, 162 Wis.2d 737, 747, 470
N.W.2d 625, 628-29 (1991). In testing
the sufficiency of the complaint, the facts pleaded by the plaintiff and all
reasonable inferences therefrom are accepted as true. Prah v. Maretti, 108 Wis.2d 223, 229, 321 N.W.2d
182, 186 (1982).
If a claim for relief
has been stated, the inquiry then shifts to the moving party's affidavits or
other proof to determine whether the moving party has made a prima facie case
for summary judgment under § 802.08, Stats. Voss, 162 Wis.2d at 747-48,
470 N.W.2d at 629. To make a prima
facie showing for summary judgment, a moving defendant must show a defense
which would defeat the plaintiff. Id.
at 748, 470 N.W.2d at 629. If the
moving party has made a prima facie case for summary judgment, the court must
examine the opposing party's affidavits and other proof to determine whether
there exist disputed material facts or undisputed material facts from which
reasonable alternative inferences may be drawn sufficient to entitle the
opposing party to a trial. Id. Summary judgment should be granted only if
there are no disputed issues of material fact and the moving party is entitled
to summary judgment as a matter of law.
Ollhoff, 177 Wis.2d at 722-23, 503 N.W.2d at 324 (citing §
802.08(2), Stats.).
At issue in this case is
whether Wilson, as the moving party, has made a prima facie case for summary
judgment under § 802.08, Stats. See Voss, 162 Wis.2d at
747-48, 470 N.W.2d at 629.
Specifically, we must determine: (1) whether Wilson has shown that
exclusion (h) in its insurance policy would defeat the respondents' claims that
it has a duty to defend and indemnify the Selvicks; (2) whether Wilson has
shown that it is not required to provide coverage under the products hazard
endorsement.
Interpretation of an
insurance contract is controlled by general principles of contract
construction. Sprangers v.
Greatway Ins. Co., 182 Wis.2d 521, 536, 514 N.W.2d 1, 6 (1994). The objective is to ascertain and carry out
the intention of the parties. Id. Of primary importance is that the language
of an insurance policy should be interpreted to mean what a reasonable person
in the position of the insured would have understood the words to mean. Id. In the absence of extrinsic evidence, interpretation of an
insurance policy is a matter of law which this court decides independently of
other courts that may have examined the policy. Id. at 532, 514 N.W.2d at 5.
A provision in an
insurance policy is ambiguous if, when read in context, it is reasonably or
fairly susceptible to more than one construction. Sprangers, 182 Wis.2d at 536-37, 514 N.W.2d at
6. Generally, if the policy is
ambiguous, the ambiguities should be construed in favor of coverage. Cardinal v. Leader Nat'l Ins. Co.,
166 Wis.2d 375, 382, 480 N.W.2d 1, 3 (1992).
EXCLUSION (H) OF THE
STOREKEEPER'S LIABILITY POLICY
We begin with our
analysis of the storekeeper's liability policy, which provides in relevant
part:
STOREKEEPER'S
LIABILITY
The company will pay on behalf of the insured all sums which the
insured shall become legally obligated to pay as damages because of bodily
injury or property damage to which this insurance applies .... [T]he company
shall have the right and duty to defend any suit against the insured seeking
damages on account of such bodily injury or property damage ....
Exclusions
This coverage does not apply:
....
(h) to
bodily injury or property damage for which the insured or his indemnitee may be
held liable
(1) as a person or organization engaged
in the business of manufacturing, distributing, selling or serving alcoholic
beverages, or
(2) if not
so engaged, as an owner or lessor of premises used for such purposes,
if
such liability is imposed
(i) by, or because of the violation of, any statute,
ordinance or regulation pertaining to the sale, gift, distribution or use
of any alcoholic beverage, or
(ii) by
reason of the selling, serving or giving of any alcoholic beverage to a minor
or to a person under the influence of alcohol or which causes or contributes
to the intoxication of any person;
but
part (ii) of this exclusion does not apply with respect to liability of the
insured or his indemnitee as an owner or lessor described in (2) above. (Bold emphasis deleted, italicized emphasis
added.)
The trial court found
exclusion (h) ambiguous in three respects.
First, the trial court found that the term "engaged" is
ambiguous as used in the phrase "engaged in the business of manufacturing,
distributing, selling or serving alcoholic beverages" in (h)(1) of the
policy. The Selvicks explain:
The
trial court noted that there is no clear definition as to that term and that it
could be subject to two reasonable interpretations. First, it could be interpreted to reflect a situation where the
Selvicks are in the business of selling and dispensing alcohol. Second, it could be interpreted to mean that
they are, at the time of the incident alleged, actively dispensing or selling
alcoholic beverages. The trial court
recognized that there is a clear distinction and that in this case it is
alleged that it was an employee of the Selvicks, and not the Selvicks
themselves which supplied the alcohol to the underage person.
The respondents argue
that under one interpretation of "engaged," the exclusion would apply
only if the Selvicks personally served Babcock. Thus, if an employee, rather than the Selvicks, served Babcock,
the exclusion under (h)(1) would not apply.
Instead, (h)(2) would apply.
This could affect whether Wilson is liable to the Selvicks because the
policy states that (h)(ii) does not apply with respect to liability of the
insured as an owner or lessor described in (h)(2).
Plaintiff Madoche also
argues that (h)(1) and (h)(2) are inherently inconsistent, stating, "How
can one not be 'engaged' in the business when 'owning' or leasing the
premises." Plaintiff Hans makes a
similar argument:
Because
John and Kimberly Selvick are owners of the insured premises, it would
be reasonable for them to assume that the exclusion does not apply to liability
imposed upon them as a result of selling, serving, or giving of any alcoholic
beverage to a minor, the very allegations contained in the complaint.
The distinction which the policy attempts
to make between liability imposed upon the insured as the operator of a
business and liability imposed on the owner of the premises is at best,
ambiguous. (Emphasis in original.)
In response to the
respondents' arguments, Wilson argues:
[T]he
Selvicks d/b/a Miami's clearly come within the language set forth in (h)(1) of
the exclusion "as a person or organization engaged in the business of
manufacturing, distributing, selling or serving alcoholic beverages." Therefore, one does not even look to (h)(2)
which begins, "if not so engaged".
This is because the Selvicks as owners and operators of a tavern named
Miami's are engaged in the business of selling or serving alcoholic beverages.
Additionally,
Wilson argues that any interpretation that implies John Selvick is only
"engaged" if he himself is selling and serving the alcoholic
beverages is absurd.
We agree with
Wilson. The word "engaged" is
not defined in the policy. However, we
may resort to a recognized dictionary in order to discern the plain meaning of
the policy's language. See Oaks
v. American Family Mut. Ins. Co., 195 Wis.2d 42, 48, 535 N.W.2d 120,
122 (Ct. App. 1995). The mere fact that
a word has more than one dictionary meaning, or that the parties disagree about
the meaning, does not necessarily make the word ambiguous if the court
concludes that only one meaning applies in the context and comports with the
parties' objectively reasonable expectations.
Sprangers, 182 Wis.2d at 537, 514 N.W.2d at 7.
According to Webster's Third New International Dictionary 751 (Unabr. 1976), "engaged" can
be defined as: "occupied,
employed," "pledged or promised esp. in marriage : betrothed,"
"greatly interested : earnest," "involved esp. in a hostile
encounter," "partly embedded or bonded," and "fitted,
framed." This court concludes that
only one meaning applies in the context of the insurance policy: occupied or employed. See Sprangers, 182
Wis.2d at 537, 514 N.W.2d at 7.
Would a reasonable
person in the position of the insured have understood the word
"engaged" to mean that he was engaged in the business of selling or
serving alcoholic beverages only when he was personally serving them? We think not. When one is occupied or employed in a business, his or her
engagement in the business does not end when he or she goes home for the night,
takes vacation or stops personally serving drinks. The respondents' interpretation of (h)(1) and (h)(2) would mean
the exclusion's coverage would vary with each and every drink sold. For instance, if both John and several
employees personally sold a person drinks over the course of an evening, (h)(1)
and (h)(2) would both appear to apply, because John would be
"engaged" when he served drinks, but "not so engaged" when
an employee sold the drinks.
Additionally, the respondents' interpretation of "engaged"
would require an organization to physically serve drinks; that is not
possible.
A provision in an
insurance policy is ambiguous if, when read in context, it is reasonably or
fairly susceptible to more than one construction. Sprangers, 182 Wis.2d at 536-37, 514 N.W.2d at
6. In this case, we conclude there is
only one reasonable interpretation of the word engaged when read in
context: occupied or employed in the
business of selling or serving alcoholic beverages. Thus, the word "engaged" is unambiguous. Its plain meaning does not imply John or
Kimberly Selvick must physically serve drinks; they are engaged in the business
of serving and selling alcoholic beverages because they own and operate a
bar. Their business continues whether
or not they are on the premises or physically serving drinks.
With respect to the
respondents' argument that (h)(1) and (h)(2) are inherently inconsistent
because one can be engaged in the business of selling alcohol and, at the same
time, own the premises, we agree with Wilson's analysis: because the Selvicks clearly fall under
(h)(1), one does not need to consider (h)(2).
While (h)(2) contemplates the situation where one who owns the premises
may not be in the business of selling alcohol, it is erroneous to conclude that
(h)(1) precludes ownership. We conclude
(h)(1) and (h)(2) are consistent and therefore do not constitute an ambiguity
in the policy.
The three complaints
allege that the Selvicks own and operate The Miami Tap. The complaints also allege that the Selvicks
and/or their agents negligently sold or dispensed alcohol to Babcock and that
this negligence was a substantial factor in causing the collision. By alleging these facts, the plaintiffs have
alleged the Selvicks are liable as "a person or organization engaged in
the business of manufacturing, distributing, selling or serving alcoholic
beverages," under (h)(1) of the policy.
Because the complaints allege facts that would place the Selvicks under
(h)(1), we never reach the issue whether the Selvicks also own or lease the
premises under (h)(2).
The second and third
provisions of the exclusion that the trial court found ambiguous were the
phrase "by, or because of the violation of any statute, ordinance or
regulation," found in (h)(i), and the word "minor," found in
(h)(ii). Because we conclude Wilson's
exclusion could apply in this case regardless of whether this phrase or the word
"minor" are ambiguous, we need not determine whether they are
ambiguous. Instead, for the reasons
explained below, we conclude Wilson, as the moving party, has made a prima
facie case for summary judgment under § 802.08, Stats., by establishing a defense which would defeat the
plaintiffs' action. See Voss,
162 Wis.2d at 748, 470 N.W.2d at 629.
We have already concluded that (h)(1)
applies. Next, we consider (h)(i) and
(h)(ii). If the Selvicks' liability may
be imposed under either section, the exclusion applies. Part (h)(ii) lists three situations where
liability is imposed: "by reason
of the selling, serving or giving of any alcoholic beverage [1] to a minor or
[2] to a person under the influence of alcohol or [3] which causes or
contributes to the intoxication of any person." (Numbers and emphasis added.)
We conclude the third situation in (ii) is alleged in the complaints,
making the exclusion applicable.
All of the complaints
allege that Babcock unlawfully operated his motor vehicle while under the
influence of alcohol after drinking alcohol at The Miami Tap. These allegations, although worded
differently in each complaint, constitute allegations that the Selvicks, by
reason of the selling of alcohol, caused or contributed to Babcock's
intoxication. Because the facts as
alleged satisfy the conditions listed in (h)(1) and (h)(ii), the exclusion
applies and Wilson has effectively established a defense against the
respondents' claims.
The next step is to
examine the affidavits and other proof of the opposing parties to determine
whether there exist disputed material facts or undisputed material facts from
which reasonable alternative inferences may be drawn sufficient to entitle the
opposing parties to a trial. Voss,
162 Wis.2d at 748, 470 N.W.2d at 629.
The respondents argue that there are issues of material fact which would
prevent this court from granting summary judgment for Wilson. Specifically, they argue, as the trial court
found, that two issues of fact exist:
(1) whether the Selvicks should be treated under (h)(1) as engaged in
the sale of alcoholic beverages, or under (h)(2) as owners of the tavern; and
(2) whether there was a violation of § 125.07(1)(a), Stats.[2] Because we have concluded that the Selvicks
clearly fall under (h)(1), and because the complaints allege facts which under
the policy would impose liability under (h)(ii), these issues are
immaterial. Consequently, there are no
issues of material fact that must be determined in order to decide whether
Wilson has a duty to defend or indemnify the Selvicks. See Voss, 162 Wis.2d at 748,
470 N.W.2d at 629. Therefore, we
conclude Wilson is entitled to summary judgment as a matter of law. See Ollhoff, 177 Wis.2d
at 722-23, 503 N.W.2d at 324 (citing § 802.08(2), Stats.).
THE PRODUCTS HAZARD
ENDORSEMENT
Roberta argues that even
if exclusion (h) applies, the Wilsons should be required to defend and
indemnify the Selvicks because of a products hazard endorsement that was also
part of the policy. Roberta argues that
the following products hazard endorsement either affords coverage, is illusory,[3]
or is confusing and therefore ambiguous:
It is
agreed that with respect to bodily injury or property damage arising out of the
named Insured's products manufactured, sold, handled or distributed
(1) on, from or in connection with the use
of any premises described in this endorsement, or
(2) in connection with the conduct of any
operation described in this endorsement, when conducted by or on behalf of the
named insured, the definition of "products hazard" is amended to read
as follows:
"products hazard" includes bodily
injury and property damage arising out of (a) the named Insured's products or
(b) reliance upon a representation or warranty made with respect thereto; but
only if the bodily injury or property damage occurs after physical possession
of such products has been relinquished to others. (Emphasis deleted.)
The
trial court examined this portion of the policy and concluded:
[I]
find that there is no product hazard coverage under the facts in this case or
the allegations in this case. Alcohol
is legal and there [are] no allegations that it is hazardous, inherently
dangerous or defective as pointed out by Wilson Mutual. There [are] no allegations of warranties and
certainly no allegations of any violations or breach of warranty so I don't see
that that comes in here at all.
Wilson argues the trial
court's decision on the products hazard coverage is not before this court
because neither Roberta nor Wilson has appealed the trial court's decision as
it applies to products hazard coverage.
We disagree. A respondent may
raise an issue without filing a cross-appeal when all that is sought is the
raising of an error which, if corrected, would sustain the judgment. See Auric v. Continental Cas.
Co., 111 Wis.2d 507, 516, 331 N.W.2d 325, 330 (1983).
Roberta argues that
either there is coverage under the products hazard endorsement or its presence
makes the policy ambiguous. She
explains:
The
products hazard [endorsement] must afford coverage for intoxicating liquor
liability, because otherwise the endorsement is valueless and illusory.
At a minimum, the presence of the products
endorsement and the intoxicating liquor exclusion in the tavern keeper's policy
makes the policy confusing and therefore ambiguous ....
[A] reasonable person standing in the
tavern owner's shoes would believe that its products were covered because they
had specifically paid for that coverage.
If a tavern owner in the Selvicks' position could be confused by these two
contradictory portions of the policy, then the policy is ambiguous. An ambiguous policy is construed against the
insurer who drafted the policy and in favor of the insured and coverage.
(Citation omitted.)
We conclude Roberta's
argument fails for several reasons.
First, we agree with the trial court that the products hazard coverage
does not apply in this case because the complaints do not allege the alcohol
itself was defective in any way, or that there was reliance on a representation
or warranty. Second, we conclude the
products hazard endorsement is not ambiguous or illusory because there are
circumstances under which the products hazard coverage could apply. For example, it could apply where a tavern
sold food or beverages that were tainted and caused people to become ill. Because this exclusion could apply in other
cases, it is not illusory and does not create an ambiguity; a reasonable
insured would not have concluded that the only coverage provided by the
products hazard endorsement is that related to coverage for alcohol-related accidents
that occur after a patron has consumed non-defective alcohol. For these reasons, we reject Roberta's
arguments with respect to the product hazard endorsement and agree with the
trial court's conclusion that the endorsement is not applicable in this case.
Because the products
hazard endorsement does not provide coverage and is not illusory or ambiguous,
Wilson has made a prima facie case for summary judgment under § 802.08, Stats., by establishing a defense which
would defeat the plaintiff. See Voss,
162 Wis.2d at 748, 470 N.W.2d at 629.
Next, we must examine whether there exist disputed facts or undisputed
material facts from which reasonable alternative inferences may be drawn
sufficient to entitle the opposing parties to a trial. Id. Roberta advances no argument that there are any disputed facts or
undisputed material facts with respect to the products hazard endorsement and
we conclude there are none. Thus,
Wilson is entitled to summary judgment as a matter of law. See Ollhoff, 177 Wis.2d
at 722-23, 503 N.W.2d at 324 (citing § 802.08(2), Stats.).
Accordingly, we reverse
that portion of the trial court's order denying Wilson's motion for summary
judgment and remand the case to the trial court with directions to grant
Wilson's motion for summary judgment and dismiss it from the case.
By the Court.—Order
reversed and cause remanded.
Not recommended for
publication in the official reports.
[1] The trial court noted that the insurance policy lists only John Selvick and declined to address how that impacts Kimberly Selvick. The issue has not been raised on appeal, and we will not address it.
[2] Section 125.07, Stats., provides in relevant part:
(1)
Alcohol beverages; restrictions relating to underage persons. (a)
Restrictions. 1. No person may procure for, sell, dispense or
give away any alcohol beverages to any underage person not accompanied by his
or her parent, guardian or spouse who has attained the legal drinking age.
2. No licensee or permittee may sell, vend, deal or traffic in alcohol beverages to or with any underage person not accompanied by his or her parent, guardian or spouse who has attained the legal drinking age.
[3] A policy provision is illusory if it defines coverage so that, in practice, it will never be triggered. Allstate Ins. Co. v. Gifford, 178 Wis.2d 341, 349, 504 N.W.2d 370, 373 (Ct. App. 1993). Where a policy provides illusory coverage, it may be expected to be reformed to conform to the insured's expectations. Id.