Bolger v. Mass. Bay Ins. Co.

411 Wis. 2d 517

Robert Bolger, Plaintiff-Respondent,

v.Massachusetts Bay Insurance Company, Defendant-Appellant,Hudson Specialty Insurance Company, ABC Insurance Company and DEF Insurance Company, Defendants,Moody Insurance Agency, Inc. OAP Choice Plan, by its Claims Administrator and Cigna Health and Life Insurance Company, Subrogated Defendants,Brady Achtenhagen and Auto-Owners Insurance Company, Defendants-Third-Party Plaintiffs,

v.Blake Cross, Third-Party Defendant.

Court of Appeals

No. 2022AP742. Submitted on briefs February 22, 2023.— Decided March 26, 2024.

2024 WI App 19

(Also reported in 5 N.W.3d 893.)

APPEAL from an order of the circuit court for Vilas County: MARTHA J. MILANOWSKI, Judge. Affirmed.

On behalf of the defendant-appellant, the cause was submitted on the briefs of Michael P. Crooks and Maria del Pizzo Sanders of von Briesen & Roper, S.C., Madison.

On behalf of the plaintiff-respondent, the cause was submitted on the brief of David S. Blinka of Habush Habush & Rottier, S.C., Madison.

Before Stark, P.J., Hruz and Gill, JJ.

¶ 1. GILL, J. The dispute in this case surrounds a homeowner's insurance policy (hereinafter, "the policy") issued by the Massachusetts Bay Insurance Company (MBIC) to the insureds, Bret and Amy Achtenhagen, and whether that policy provided them with coverage for "personal liability" and "medical payments to others" following a utility terrain vehicle (UTV) accident away from their primary residence. The policy excluded that coverage for the ownership, maintenance, use, loading or unloading of the UTV. However, an exception to that exclusion reinstated the coverage for lawsuits brought against the Achtenhagens for bodily injury arising out of "[t]he ownership, maintenance, use, loading or unloading of' a UTV "which is" "[u]sed to service an 'insured's' residence." The questions on appeal are whether the exception is fairly susceptible to more than one reasonable con- struction and whether, under the policy, MBIC was bound to defend and indemnify the Achtenhagens.

¶ 2. Although no Wisconsin appellate court has previously interpreted the particular language used in the policy exception at issue, we conclude that the exception, when properly read in the context of the policy's other language, is reasonably susceptible to more than one construction. Either the exception: (1) reinstates liability coverage for an occurrence resulting in bodily injury at the "'insured's' residence" arising out of a conveyance that was servicing that residence at the time of the occurrence; or (2) reinstates coverage for an occurrence resulting in bodily injury at any location arising out of a conveyance that serviced the "'insured's' residence" at some point, but not necessarily at the time of the injury. The complaint in this case adequately alleged facts that would require MBIC to defend and indemnify the Achtenhagens under the second of these reasonable interpretations. Accordingly, the circuit court properly concluded that MBIC was obligated to defend and indemnify the Achtenhagens. We therefore affirm.

BACKGROUND

¶ 3. MBIC issued a homeowner's insurance policy to Bret and Amy Achtenhagen covering the period from November 2018 to November 2019. According to the policy's declarations page, the policy covered the Achtenhagens' primary home in Dousman, Wisconsin, where they and their son Brady¹ lived. The policy, which we describe in greater detail below, included a section titled "Liability coverages," which provided coverage for "personal liability" and "medical payments to others." The section also contained an exclusion (hereinafter, "exclusion") stating that those two coverages did not apply to "bodily injury" or "property damage" "[a]rising out of' "[t]he ownership, maintenance, use, loading or unloading of … motorized land conveyances … owned or operated by … an 'insured.'" An exception (hereinafter, "Exception (4)(a)") provided that the exclusion did not apply to "[a] vehicle or conveyance not subject to motor vehicle registration which is" "[u]sed to service an 'insured's' residence."

¶ 4. In December 2018, Robert Bolger was a passenger on a UTV operated by Brady near the Achtenhagens' second home on South Turtle Lake in Winchester, Wisconsin. While Brady was operating the UTV on the lake's frozen surface, Brady "lost control" of the UTV, which turned over on its side and crushed Bolger's right leg.

¶ 5. Bolger filed a lawsuit against Brady and numerous entities, including MBIC. Bolger asserted that MBIC, as the Achtenhagens' insurer, was liable to him for his injuries and damages.² MBIC filed an answer and affirmative defenses, asserting that the policy did not provide "liability coverage for the losses alleged" in Bolger's complaint.

¶ 6. Another insurance company named in the lawsuit filed a motion to bifurcate the issues of insurance coverage from the merits of the underlying action and to stay all liability proceedings, which MBIC joined. The circuit court granted the motion. Thereafter, MBIC filed a motion for declaratory judgment, arguing that it had no duty to defend and indemnify the Achtenhagens because the policy did not provide liability coverage to them. In particular, MBIC asserted that Exception (4)(a) did not apply because Bolger's injuries occurred "away from the insured location." That is, the accident occurred at the Achtenhagens' second residence in Winchester, not at their primary residence in Dousman.

¶ 7. The circuit court denied MBIC's motion for declaratory judgment, reasoning that Exception (4)(a) was ambiguous. The court therefore held that MBIC was obligated to defend and indemnify the Achtenhagens.³ Prior to a scheduled jury trial, MBIC stipulated to a judgment in the amount of $150,000 (conditioned on the outcome of this appeal), and, pursuant to that stipulation, the court entered an order awarding Bolger a judgment in that amount against MBIC. MBIC now appeals that order, arguing that the policy unambiguously did not provide liability coverage to the Achtenhagens for Bolger's injury.

DISCUSSION

[1, 2]

¶ 8. Where a circuit court's denial of declaratory judgment turns upon its interpretation of an insurance policy, a question of law is presented that we review de novo. See Dostal v. Strand, 2023 WI 6, ¶ 18, 405 Wis. 2d 572, 984 N.W.2d 382. Similarly, we independently interpret an insurance policy to determine whether coverage is provided, id., ¶ 20, and whether any ambiguity exists, Varda v. Acuity, 2005 WI App 167, ¶ 8, 284 Wis. 2d 552, 702 N.W.2d 65.

[3]

¶ 9. "Contracts for insurance typically impose two main duties: the duty to indemnify the insured against damages or losses, and the duty to defend against claims for damages." Olson v. Farrar, 2012 WI 3, ¶ 27, 338 Wis. 2d 215, 809 N.W.2d 1. "An insurer must indemnify an insured against losses that are covered under the terms of the policy." Id., ¶ 28. However, an "insurer is under an obligation to defend only if it could be held bound to indemnify the insured, assuming that the injured person proved the allegations of the complaint, regardless of the actual outcome of the case." Id., ¶ 29 (citation omitted). MBIC refused to provide a defense to the Achtenhagens for Bolger's lawsuit. Therefore, the question on this appeal is whether MBIC had a duty to defend Achtenhagens under the policy because it "could be held bound to indemnify" them. See id.

[4–8]

¶ 10. To answer this question, we apply the four-corners rule. See id., ¶ 33. Under the four-corners rule, "[a]n insurer's duty to defend an insured is determined by comparing the allegations of the complaint to the terms of the insurance policy." Fireman's Fund Ins. Co. of Wis. v. Bradley Corp., 2003 WI 33, ¶ 19, 261 Wis. 2d 4, 660 N.W.2d 666. The "rule prohibits a court from considering extrinsic evidence when determining whether an insurer breached its duty to defend." Water Well Sols. Serv. Grp., Inc. v. Consolidated Ins. Co., 2016 WI 54, ¶ 15, 369 Wis. 2d 607, 881 N.W.2d 285. Furthermore, "a court must liberally construe the allegations contained in the underlying complaint [and] assume all reasonable inferences from the allegations made in the complaint." Id. [9-11]

¶ 11. The Wisconsin standard for determining whether an insurance policy provides coverage is well settled, and it involves three steps of analysis.

[A] court first looks to the initial grant of coverage …. "If the court determines that the initial grant of coverage does cover the type of claim presented, the second step requires the court to examine the policy's exclusions to determine whether coverage has been withdrawn by an exclusion." "[I]f coverage for the claim has been withdrawn by an exclusion, the court examines any exceptions to that exclusion that might reinstate coverage for the claim."

Schinner v. Gundrum, 2013 WI 71, ¶ 37, 349 Wis. 2d 529, 833 N.W.2d 685 (second alteration in original; citations omitted). "We interpret an insurance contract as it would be understood by a reasonable person in the position of the insured," and "we seek to 'give effect to the intent of the contracting parties.'" Id., ¶ 38 (citation omitted). When interpreting an insurance policy, we give the words used in the policy their common and ordinary meaning. Wadzinski v. Auto-Owners Ins. Co., 2012 WI 75, ¶ 11, 342 Wis. 2d 311, 818 N.W.2d 819.

[12–15]

¶ 12. "Where ambiguity exists in a grant of coverage, we will construe the policy against the drafter, and in favor of the reasonable expectations of the insured." Id. An insurance policy's grant of coverage can present ambiguity in one of two ways. First, the "[t]erms of an insurance policy may be inherently ambiguous." Frost ex rel. Anderson v. Whitbeck, 2002 WI 129, ¶ 18, 257 Wis. 2d 80, 654 N.W.2d 225. Second, and as relevant to the policy in this case, "a clear and unambiguous provision may be found ambiguous in the context of the entire policy." Folkman v. Quamme, 2003 WI 116, ¶ 19, 264 Wis. 2d 617, 665 N.W.2d 857.

The test for determining whether

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