2018 WI 103
SUPREME COURT OF WISCONSIN CASE NO.: 2016AP299 COMPLETE TITLE: SECURA Insurance, A Mutual Company, Plaintiff-Appellant-Cross-Respondent- Petitioner, v. Lyme St. Croix Forest Company, LLC, Lyme St. Croix Land Company LLC, St. Croix Forest Products LLC, American Family Mutual Insurance Company, Safeco Insurance Company of America, State Farm Fire & Casualty Company, Wisconsin Mutual Insurance Company, Erie Insurance Group, Wilson Mutual Insurance Company, USAA Casualty Insurance Company, Western National Insurance Company p/k/a Western National Assurance Company, Auto-Owners Insurance Company, Farmers Insurance Exchange, Sentry Insurance Company, a mutual company, Jeremiah Nelson, Amy Nelson, Steigerwaldt Tree Farms, LLC, Steigerwaldt Land Services, Inc., LFF III Timber Holding, Frankenmuth Insurance Company, General Casualty Company of Wisconsin, Regent Insurance Company, Continental Western Insurance Company, Foremost Insurance Company of Grand Rapids Michigan, Foremost Property and Casualty Insurance Company, West Bend Mutual Insurance Company, American Family Home Insurance Company, Integrity Mutual Insurance Company, Defendants-Respondents, Hanover Insurance Company, Defendant-Respondent-Cross-Appellant.
REVIEW OF DECISION OF THE COURT OF APPEALS Reported at 378 Wis. 2d 740, 905 N.W.2d 843 (2017 – unpublished)
OPINION FILED: October 30, 2018 SUBMITTED ON BRIEFS: ORAL ARGUMENT: September 5, 2018
SOURCE OF APPEAL: COURT: Circuit COUNTY: Douglas JUDGE: Kelly J. Thimm
JUSTICES: CONCURRED: DISSENTED: NOT PARTICIPATING:
ATTORNEYS:
For the plaintiff-appellant—cross-respondent-petitioner, there were briefs filed by Patryk Silver and Borgelt, Powell, Peterson & Frauen, S.C., Milwaukee. There was an oral argument by Patryk Silver.
For the defendant-respondent-cross-appellant, there was a brief filed by Douglas M. Raines, Heidi L. Vogt, and von Briesen & Roper, S.C., Milwaukee, with whom on the brief were Timothy F. Casey, Patrick D. Crandell, and Collins Einhorn Farrell PC, Southfield, Michigan.
For the defendants-respondents, there was a brief filed by Nicholas D. Harken, Eugene M. LaFlamme, and McCoy Leavitt Laskey LLC, Waukesha, with whom on the brief were Erik J. Pless and Everson, Whitney, Everson & Brehm, S.C., Green Bay. There was an oral argument by Eugene M. LaFlamme.
An amicus curiae brief was filed on behalf of the Wisconsin Insurance Alliance by Linda S. Schmidt, James A. Friedman, and Godfrey & Kahn, S.C., Madison.
2 2018 WI 103 NOTICE This opinion is subject to further editing and modification. The final version will appear in the bound volume of the official reports. No. 2016AP299 (L.C. No. 2014CV174 & 2014CV361)
STATE OF WISCONSIN : IN SUPREME COURT
SECURA Insurance, A Mutual Company,
Plaintiff-Appellant-Cross-Respondent- Petitioner, v.
Lyme St. Croix Forest Company, LLC, Lyme St. Croix Land Company LLC, St. Croix Forest Products LLC, American Family Mutual Insurance Company, Safeco Insurance Company of America, State Farm Fire & Casualty Company, Wisconsin Mutual Insurance Company, Erie Insurance Group, Wilson Mutual Insurance Company, USAA Casualty Insurance Company, Western National Insurance Company p/k/a Western National Assurance FILED Company, Auto-Owners Insurance Company, Farmers Insurance Exchange, Sentry Insurance Company, a OCT 30, 2018 mutual company, Jeremiah Nelson, Amy Nelson, Steigerwaldt Tree Farms, LLC, Steigerwaldt Land Sheila T. Reiff Services, Inc., LFF III Timber Holding, Clerk of Supreme Court Frankenmuth Insurance Company, General Casualty Company of Wisconsin, Regent Insurance Company, Continental Western Insurance Company, Foremost Insurance Company of Grand Rapids Michigan, Foremost Property and Casualty Insurance Company, West Bend Mutual Insurance Company, American Family Home Insurance Company, Integrity Mutual Insurance Company,
Defendants-Respondents,
Hanover Insurance Company,
Defendant-Respondent-Cross-Appellant. REVIEW of a decision of the Court of Appeals. Reversed and
cause remanded.
¶1 ANN WALSH BRADLEY, J. The petitioner, SECURA
Insurance, A Mutual Company, seeks review of an unpublished, per
curiam decision of the court of appeals affirming the circuit
court's interlocutory order that determined the fire at issue
constituted multiple occurrences instead of a single occurrence.1
The court of appeals reasoned that under Secura's commercial
general liability (CGL) policy there was an occurrence each time
the fire spread to a new piece of real property and caused
damage. Therefore, the court concluded that the $2 million
aggregate limit applies rather than the $500,000 per-occurrence
limit for property damage due to fire arising from logging and
lumbering operations.
¶2 Secura asserts that the court of appeals erred, and
that pursuant to the "cause theory," the fire constitutes a single occurrence. Despite the fact that the fire crossed
several property lines, Secura contends it was a single,
uninterrupted cause of the alleged damages.
1 SECURA Ins. v. Lyme St. Croix Forest Co., LLC, No. 2016AP299, unpublished slip op. (Wis. Ct. App. Oct. 11, 2017) (affirming in part and reversing in part an order of circuit court for Douglas County, Kelly J. Thimm, Judge).
2 No. 2016AP299
¶3 We conclude that the fire at issue constitutes a
single occurrence pursuant to the CGL policy. Consequently, the
$500,000 per-occurrence limit for property damage applies.
¶4 Accordingly, we reverse the court of appeals and
remand to the circuit court for further proceedings consistent
with this opinion.
I
¶5 On May 16, 2013, a fire broke out on forest land owned
by Lyme St. Croix Forest Company (Lyme St. Croix). Known as the
"Germann Road Fire," it burned 7,442 acres over the course of
three days. Real and personal property belonging to many
individuals and businesses sustained damage.
¶6 The fire allegedly began in the cutting head of a
piece of logging equipment known as a feller buncher, owned by
Ray Duerr Logging, LLC (Duerr). Flames quickly spread from dry
grass to a pile of recently felled jack pine and subsequently
into the surrounding forest.
¶7 At the time of the fire, Secura insured Duerr under both a CGL policy and an umbrella policy. The CGL policy
contained a $2 million general aggregate policy limit, and a $1
million per-occurrence limit. However, the CGL policy also
incorporated a "Logging and Lumbering Operations Endorsement."
Pursuant to this endorsement, the per-occurrence policy limit is
reduced to $500,000 for property damage "due to fire, arising
from logging or lumbering operations . . . ."
3 No. 2016AP299
¶8 Secura brought this declaratory judgment action to
determine its coverage obligations with respect to Duerr.2
Moving for declaratory judgment and partial summary judgment,
Secura argued that the Germann Road Fire was a single
occurrence. Consequently, it advanced that the $500,000 policy
limit from the Logging and Lumbering Operations Endorsement was
applicable, rather than the $2 million aggregate limit. Secura
also contended that the umbrella policy afforded no coverage for
the damage from the fire.
¶9 The circuit court rejected Secura's argument regarding
the applicable policy limit. Relying on Wilson Mut. Ins. Co. v.
Falk, 2014 WI 136, 360 Wis. 2d 67, 857 N.W.2d 156, the circuit
court concluded that "although there was one uninterrupted cause
of the fire, each 'seepage' of fire onto another's property
constitute[d] a separate occurrence for purposes of the policy."
However, the circuit court agreed with Secura that its umbrella
policy provided no coverage for any damages.
¶10 Two parties sought leave to appeal the circuit court's order, and the court of appeals granted an interlocutory appeal.3 2 Secura initially filed its complaint in Outagamie County. Venue was transferred to Douglas County, where the action was ultimately consolidated with a related suit filed by two property owners who alleged damage from the Germann Road Fire. 3 See Wis. Stat. § 808.03(2) (2015-16) (explaining that the court of appeals will grant an interlocutory appeal if an appeal will "[m]aterially advance the termination of the litigation or clarify further proceedings in the litigation; [p]rotect the petitioner from substantial or irreparable injury; or [c]larify an issue of general importance in the administration of justice").
4 No. 2016AP299
Secura appealed the circuit court's determination as to the CGL
policy limit. Hanover Insurance Company (Hanover), Lyme St.
Croix's insurer, challenged the circuit court's conclusion that
the umbrella policy provided no coverage.
¶11 The court of appeals affirmed in part and reversed in
part. It affirmed the circuit court's determination regarding
the CGL policy, concluding that the circuit court properly
applied the $2 million aggregate policy limit. SECURA Ins. v.
Lyme St. Croix Forest Co., LLC, No. 2016AP299, unpublished slip
op., ¶21 (Wis. Ct. App. Oct. 11, 2017). Like the circuit court,
the court of appeals relied principally on Falk, 360 Wis. 2d 67,
determining that "there was an 'occurrence' each time the fire——
fueled and expanded by the consumption of new materials——spread
to a new piece of real property and caused damage." SECURA
Ins., No. 2016AP299, unpublished slip op., ¶17.
¶12 However, the court of appeals reversed the circuit
court's determination that the umbrella policy provided no
coverage.4 Neither party, however, petitioned this court for
4 Before the court of appeals, Hanover argued against the application of an exclusion in the umbrella policy stating that the liability policy did not apply to "'Property damage' arising out of injury or damage to or destruction of standing timber or timberlands, including the loss of use thereof, caused by fire and arising out of operations performed by or on behalf of any insured." SECURA Ins., No. 2016AP299, unpublished slip op., ¶22. The court of appeals reversed the circuit court's grant of summary judgment as to the umbrella policy, and remanded for a factual determination of what damages, if any, were sustained to an approximately 30 to 40 yard segment of real property that burned before the fire became a standing timber fire. Id., ¶29.
5 No. 2016AP299
review of the portion of the court of appeals' decision
regarding the umbrella policy. Accordingly, we do not address
the issue.5
II
¶13 We are asked to review the determination of Secura's
motions for declaratory and summary judgment, which requires us
to interpret the parties' written insurance contract.
Interpretation of an insurance contract presents a question of
law. American Family Mut. Ins. Co. v. American Girl, Inc., 2004
WI 2, ¶23, 268 Wis. 2d 16, 673 N.W.2d 65.
¶14 When a ruling on a motion for declaratory judgment
depends on questions of law, we review the ruling independently
of the determinations rendered by the circuit court and court of
appeals. Gister v. American Family Mut. Ins. Co., 2012 WI 86,
¶8, 342 Wis. 2d 496, 818 N.W.2d 880.
¶15 Similarly, we review a summary judgment decision
independently, applying the same methodology as the circuit
court. Shugarts v. Mohr, 2018 WI 27, ¶17, 380 Wis. 2d 512, 909 N.W.2d 402. Summary judgment is appropriate where there is no
genuine issue as to any material fact and the moving party is
entitled to judgment as a matter of law. Id.
5 See Novell v. Migliaccio, 2008 WI 44, ¶65, 309 Wis. 2d 132, 749 N.W.2d 544 (a party that fails to file a petition for cross-review does not preserve those issues for supreme court review); Priesler v. General Cas. Ins. Co., 2014 WI 135, ¶59, 360 Wis. 2d 129, 857 N.W.2d 136 (explaining that this court regularly "decline[s] to consider issues not raised in petitions for review").
6 No. 2016AP299
III
¶16 This case presents the issue of whether the Germann
Road Fire constitutes a single occurrence for purposes of the
CGL policy, or whether there was instead a new occurrence each
time the fire crossed a property line. Initially, we set forth
the language of the CGL policy. Next, we adduce the principles
of law that guide our analysis. Finally, we apply the language
of the policy and those principles of law to the facts of this
case.
A
¶17 We begin with the language of the insurance policy.
Generally, we interpret a policy's terms as they would be
understood from the perspective of a reasonable person in the
position of the insured. Shugarts, 380 Wis. 2d 512, ¶20 (citing
Frost ex rel. Anderson v. Whitbeck, 2002 WI 129, ¶20, 257
Wis. 2d 80, 654 N.W.2d 225). Specifically, in the context of
determining the number of occurrences, we have framed this query
in terms of the "average person." Welter v. Singer, 126 Wis. 2d 242, 251, 376 N.W.2d 84 (Ct. App. 1985); see also Falk,
360 Wis. 2d 67, ¶¶66-67; Plastics Eng'g Co. v. Liberty Mut. Ins.
Co., 2009 WI 13, ¶38, 315 Wis. 2d 556, 759 N.W.2d 613.
¶18 The CGL policy covers "bodily injury" or "property
damage" that is "caused by an 'occurrence' . . . ." An
"occurrence" is defined in the policy as "an accident, including
continuous or repeated exposure to substantially the same
general harmful conditions."
7 No. 2016AP299
¶19 As relevant here, the policy contains two monetary
limits. First, there is a general aggregate limit of $2
million. This limit applies regardless of the number of covered
occurrences. Second, the policy's "Logging and Lumbering
Operations Endorsement" contains a $500,000 per-occurrence limit
that applies "as respects 'property damage' due to fire, arising
¶20 We must determine which of the two policy limits
applies. If the Germann Road Fire is a single occurrence, then
the lesser $500,000 limit applies. On the other hand, if there
is a new occurrence each time the fire crosses a property line,
as the court of appeals concluded, then the $2 million limit
applies.
B
¶21 We turn next to adduce the principles of law that
guide our analysis. In determining whether an event constitutes
a single occurrence or multiple occurrences, we look to the
"cause theory." Olsen v. Moore, 56 Wis. 2d 340, 349-51, 202 N.W.2d 236 (1972); Falk, 360 Wis. 2d 67, ¶66 (citing Plastics
Eng'g Co., 315 Wis. 2d 556, ¶35). Pursuant to the cause theory,
"where a single, uninterrupted cause results in all of the
injuries and damage, there is but one 'accident' or
'occurrence.'" Welter, 126 Wis. 2d at 250. If "cause and
result are 'so simultaneous or so closely linked in time and
space as to be considered by the average person as one event,'"
then only a single occurrence has taken place. Falk, 360 Wis. 2d 67, ¶66 (citing Welter, 126 Wis. 2d at 251). "If, 8 No. 2016AP299
however, that cause is interrupted or replaced by another cause
the chain of causation is broken and more than one accident or
occurrence has taken place." Olsen, 56 Wis. 2d at 349.
¶22 By following the cause theory, Wisconsin courts
disavow the opposing "effect theory." Olsen, 56 Wis. 2d at 351;
see also Arnold P. Anderson, Anderson on Wisconsin Insurance Law
§ 2.66 (7th ed. 2015). The effect theory suggests that the
wording "each accident" "must be construed from the point of
view of the person whose property was injured." Anchor Cas. Co.
v. McCaleb, 178 F.2d 322, 324 (5th Cir. 1949); see Olsen, 56
Wis. 2d at 347 (explaining that "[a] small number of
jurisdictions subscribe to the 'effect theory' of liability").
¶23 Accordingly, pursuant to the effect theory, there is
an occurrence when the separate property of each claimant is
damaged. Anchor Cas. Co., 178 F.2d at 324-25. Under this
theory, "[i]f one cause operates upon several at one time, it
cannot be regarded as a single incident, but the injury to each
individual is a separate accident." Id. at 325. C
¶24 Finally, we apply the language of the policy and the
above principles of law to this case. Both the circuit court
and court of appeals purported to apply the cause theory. Each
relied heavily on Plastics Eng'g Co. and Falk to reach the
conclusion that the Germann Road Fire constituted multiple
occurrences, with a new occurrence arising each time the fire
crossed a property line. Those two cases, along with Welter, 126 Wis. 2d 242, are particularly instructive. 9 No. 2016AP299
¶25 In Plastics Eng'g Co., the insured manufactured and
sold asbestos-containing products for over twenty years. 315
Wis. 2d 556, ¶6. Multiple claimants sued the insured, asserting
causes of action for bodily injury or wrongful death that arose
from exposure to asbestos-containing products. Id. "In
general, the claimants allege[d] that they were injured by their
first exposure to asbestos, but their asbestos-related injuries
did not manifest until long after their exposure to asbestos."
Id. "The claimants' exposures allegedly occurred at different
times and at different geographical locations." Id.
¶26 This court determined that multiple occurrences arose.
Id., ¶40. We explained that "each individual claimant's
injuries stem from the continued and repeated exposure to
asbestos-containing products. Thus, under the policy language
and the cause theory, each claimant's repeated exposure is one
occurrence." Id., ¶39.
¶27 Arriving at this result, the Plastics Eng'g Co. court
contrasted the facts of that case with those of Welter, 126 Wis. 2d 242. Plastics Eng'g Co., 315 Wis. 2d 556, ¶¶37-38. In
Welter, a driver struck a bicyclist, stopped, and then drove
forward, dragging the bicyclist beneath the car. 126 Wis. 2d at
246. The driver stopped again, then moved the car forward about
a foot. Id. Finally, the driver got out of the car and a
second driver got in, who attempted to free the bicyclist from
under the car by backing up about ten feet. Id.
¶28 The court of appeals in Welter determined the entirety of this event to be a single occurrence. Id. at 245. Applying 10 No. 2016AP299
the cause theory, it wrote that "[i]f cause and result are so
simultaneous or so closely linked in time and space as to be
considered by the average person as one event," there is only
one occurrence. Id. at 251. "The fact that there were multiple
injuries and that they were of different magnitudes and that
injuries extended over a period of time does not alter our
conclusion that there was a single occurrence. As long as the
injuries stem from one proximate cause there is a single
occurrence." Id. at 250-51 (quoting Appalachian Ins. Co. v.
Liberty Mut. Ins. Co., 676 F.2d 56, 61 (3d Cir. 1982)).
¶29 In contrast, the exposures to asbestos at issue in
Plastics Eng'g Co. were not closely linked in either time or
space. 315 Wis. 2d 556, ¶6. There, numerous individuals
sustained injuries at varying geographic locations over a period
of years. Id.
¶30 More recently, in Falk, the insured spread liquid cow
manure on farm fields as fertilizer. 360 Wis. 2d 67, ¶5.
Several neighbors alleged that the manure contaminated their wells. Id., ¶6.
¶31 Applying the cause theory, this court determined that
"[b]ecause the occurrence under the . . . policy is well
contamination, not manure application, there was an occurrence
each time manure seeped into a unique well." Id., ¶67. "As
such, an 'average person' would not consider the well
contamination to be one event because manure had to seep into
each individual well for the alleged contamination to occur." Id. "Further, because the manure had to seep into each 11 No. 2016AP299
individual well, rather than seep into one well which 'fed' the
other wells, it cannot be said the seepage was 'so simultaneous
or so closely linked in time and space as to be considered by
the average person as one event.'" Id.
¶32 Here, the court of appeals concluded that Falk
controlled. It analogized the fire at issue to the seepage of
manure that occurred in Falk. The court of appeals' approach is
unpersuasive for several reasons.
¶33 First, there are significant factual differences
between a forest fire and the seepage of manure into a well.
When determining whether there is one occurrence or multiple
occurrences, we must take into account elements of time and
geography. Specifically, a single occurrence takes place if the
cause and result were "so simultaneous or so closely linked in
time and space as to be considered by the average person as one
event . . . ." Plastics Eng'g Co., 315 Wis. 2d 556, ¶38
(quoting Welter, 126 Wis. 2d at 251).
¶34 In Falk, the manure seeped over the course of an unspecified period of time.6 Conversely, the fire in this case
burned continuously for three uninterrupted days. A three-day
fire in a discrete area caused by a single precipitating event
would reasonably be considered by the average person to be one
6 The Falk decision explains that the insured spread the manure in "early 2011" and the DNR notified the insured of well contamination complaints by letter dated May 23, 2011. Wilson Mut. Ins. Co. v. Falk, 2014 WI 136, ¶¶5-6, 360 Wis. 2d 67, 857 N.W.2d 156.
12 No. 2016AP299
event. Regardless of how many property lines the fire crossed,
the damage closely follows the cause in both time and space.
¶35 Rather than being analogous to Falk, this case is more
akin to Welter. In Welter, there may have been "multiple
injuries" that were of "different magnitudes" over a short
period of time, but that fact did not alter the court's
conclusion that there was a single occurrence. See Welter, 126
Wis. 2d at 250 (citing Appalachian Ins. Co., 676 F.2d at 61).
"As long as the injuries stem from one proximate cause there is
a single occurrence." Id. at 250-51. The same is true here.
In both cases, an average person would view the cause and result
as a single event.
¶36 Second, the court of appeals' analysis, although
purporting to apply the cause theory, in practice presents an
application of the effect theory rejected by this court.
According to the court of appeals, "the fire had to spread to
each piece of real property for another property owner to suffer
property damage due to the fire." SECURA Ins., No. 2016AP299, unpublished slip op., ¶21. By focusing not on the cause of the
damage, but on the effect on individual property owners, the
court of appeals strayed from this court's established
methodology for determining the number of occurrences. See
Olsen, 56 Wis. 2d at 349-51.
¶37 Third, the court's focus in Falk was primarily on the
insurance policy's pollution exclusion, which the court
determined to bar coverage, rather than the number of occurrences that took place. Falk, 360 Wis. 2d 67, ¶3. The 13 No. 2016AP299
record in Falk lacked detail regarding the spreading of the
manure and the eventual seepage. Id., ¶¶5-6; see supra ¶32 n.6.
Accordingly, the Falk court devoted only two paragraphs to the
cause theory analysis. See Falk, 360 Wis. 2d 67, ¶¶66-67.
¶38 Finally, the court of appeals' decision appears to
occasion arbitrary and unreasonable consequences. It is
arbitrary to determine the number of occurrences solely from the
number of owners whose property is damaged. Under the court of
appeals' analysis, the fire could have burned exactly the same
amount of land over exactly the same amount of time, but if all
the land were owned by one person instead of several, the fire
would constitute but one occurrence. Such a result would force
the insurer to pay more in the event that the same amount of
land burned is split among several owners.
¶39 Further, the court of appeals determined that "there
was an 'occurrence' each time the fire——fueled and expanded by
the consumption of new materials——spread to a new piece of real
property and caused damage." SECURA Ins., No. 2016AP299, unpublished slip op., ¶17. This premise appears to lead to
unreasonable results. It is the nature of a fire to "fuel and
expand by the consumption of new materials." If it is an
occurrence each time a fire refuels and expands, then a fire,
which is constantly refueling and expanding, will necessarily
result in an unfathomably large number of occurrences regardless
of how many property lines it crosses. A court's interpretation
of an insurance policy should avoid unreasonable results.
14 No. 2016AP299
Blasing v. Zurich Am. Ins. Co., 2014 WI 73, ¶43, 356 Wis. 2d 63,
850 N.W.2d 138.
¶40 Our conclusion that the fire here constitutes a single
occurrence is buttressed by decisions from other jurisdictions
likewise determining a fire destroying the property of multiple
claimants to be a single occurrence. See Denham v. La Salle-
Madison Hotel Co., 168 F.2d 576, 583 (7th Cir. 1948) (explaining
that a fire that damaged property in numerous hotel rooms was a
single occurrence); Barrett v. Iowa Nat'l Mut. Ins. Co., 264
F.2d 224, 226 (9th Cir. 1959) (concluding that there is "no
merit" to the contention that a single fire that damaged
property owned by seven different tenants in a building was
seven accidents within the meaning of the policy); Tri-State
Roofing Co. v. New Amsterdam Cas. Co., 139 F. Supp. 193, 198
(W.D. Pa. 1955) (determining, on rehearing, that a fire damaging
eleven properties that began with an overturned pot of tar was a
single occurrence); Travelers Indem. Co. v. New England Box Co.,
157 A.2d 765, 769 (N.H. 1960) (concluding that a fire spreading to several properties is a single occurrence because "reasonable
persons would regard [it] as one accident, no matter how many
persons should become involved") (citation omitted).
¶41 In sum, we conclude that the Germann Road Fire
constitutes a single occurrence pursuant to the CGL policy.
Consequently, the $500,000 per-occurrence limit for property
damage applies.
15 No. 2016AP299
¶42 Accordingly, we reverse the court of appeals and
remand to the circuit court for further proceedings consistent
By the Court.—The decision of the court of appeals is
reversed, and the cause is remanded to the circuit court for
further proceedings consistent with this opinion.
16 No. 2016AP299