Full Opinion (html_with_citations)
2023 WI App 3

                 COURT OF APPEALS OF WISCONSIN
                      PUBLISHED OPINION

Case No.:              2021AP807



Complete Title of Case:


              SECURA INSURANCE, A MUTUAL COMPANY,

                     PLAINTIFF-APPELLANT,

                V.

              33 ALLENTON VENTURE, L.L.C. AND NORSE BUILDING PRODUCTS,

              INC.,

                     DEFENDANTS-RESPONDENTS.



Opinion Filed:          December 7, 2022
Submitted on Briefs:    April 28, 2022
Oral Argument:

JUDGES:                 Gundrum, P.J., Neubauer and Grogan, JJ.
     Concurred:
     Dissented:

Appellant
ATTORNEYS:              On behalf of the plaintiff-appellant, the cause was submitted on the
                        briefs of Barbara A. O’Brien and Patryk Silver of Borgelt, Powell,
                        Peterson & Frauen, S.C., Milwaukee.

Respondents
ATTORNEYS:              On behalf of the defendant-respondents, the cause was submitted on
                        the briefs of William T. Stuart and Garret A. Soberalski of Meissner
                        Tierney Fisher & Nichols S.C., Milwaukee, and Brent D. Nistler and
                        James F. Cirincione of Hansen Reynolds LLC, Milwaukee.
2023 WI App 3

        COURT OF APPEALS
            DECISION                                           NOTICE
         DATED AND FILED                       This opinion is subject to further editing. If
                                               published, the official version will appear in
                                               the bound volume of the Official Reports.
         December 7, 2022
                                               A party may file with the Supreme Court a
                  Sheila T. Reiff              petition to review an adverse decision by the
             Clerk of Court of Appeals         Court of Appeals. See WIS. STAT. § 808.10 and
                                               RULE 809.62.




Appeal No.          2021AP807                                                Cir. Ct. No. 2020CV78

STATE OF WISCONSIN                                         IN COURT OF APPEALS



SECURA INSURANCE, A MUTUAL COMPANY,

       PLAINTIFF-APPELLANT,

  V.

33 ALLENTON VENTURE, L.L.C. AND NORSE BUILDING PRODUCTS,

INC.,

       DEFENDANTS-RESPONDENTS.




                 APPEAL from an order of the circuit court for Winnebago County:
SCOTT C. WOLDT, Judge. Reversed and cause remanded with directions.

                 Before Gundrum, P.J., Neubauer and Grogan, JJ.

        ¶1       GUNDRUM, P.J. Secura Insurance, A Mutual Company, appeals
from an order of the circuit court concluding that insurance coverage exists for
damage caused by water that flowed from a broken pipe located below a building
                                                                                No. 2021AP807




owned by 33 Allenton Venture, L.L.C. and in which Norse Building Products, Inc.
was a tenant. Specifically, Secura contends the court erred because the water
exclusion in separate insurance policies it issued to 33 Allenton and Norse bars
coverage for the damage. Because we agree with Secura, we reverse and remand
for the entry of declaratory and summary judgment in its favor.

                                            Background

       ¶2        The material facts are undisputed.               In 2019, a pipe owned by
33 Allenton, located beneath its building, and connected to a municipal water pipe
failed, allowing water to escape and cause damage to the basement, foundation, and
floors of the building as well as Norse’s leased premises and personal property.
Prior to that damage occurring, Secura had issued insurance policies to both 33
Allenton and Norse.1 Secura paid 33 Allenton $32,280 for the cost to repair the pipe
itself but maintains that the water exclusion in each policy bars coverage and it owes
no additional amounts.

       ¶3        Secura brought a declaratory judgment action seeking a ruling on the
question of coverage. 33 Allenton and Norse counterclaimed for breach of contract
and declaratory judgment, and Norse also counterclaimed for promissory estoppel.
Secura filed a motion for declaratory judgment and summary judgment and 33
Allenton and Norse filed motions for summary judgment. The circuit court granted
33 Allenton’s and Norse’s motions, concluding that the policies afford coverage for
the water damage.           The parties stipulated to the amount of damages, Norse
dismissed its promissory estoppel claim, and Secura appeals.




       1
           The policies are identical in all material respects.



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                                         Discussion

       ¶4      We review the circuit court’s grant of summary judgment de novo.2
Paskiewicz v. American Fam. Mut. Ins. Co.,
2013 WI App 92, ¶4
,
349 Wis. 2d 515
,
834 N.W.2d 866
. “Summary judgment is properly granted if there is no
genuine issue of material fact in dispute and the moving party is entitled to judgment
as a matter of law.” American Fam. Mut. Ins. Co. v. American Girl, Inc.,
2004 WI 2, ¶22
,
268 Wis. 2d 16
,
673 N.W.2d 65
. Although declaratory judgment “is
addressed to the discretion of the [circuit] court,” our review is de novo “[w]hen the
exercise of discretion depends upon a question of law” such as the “interpretation
of an insurance” policy. Praefke v. Sentry Ins. Co.,
2005 WI App 50, ¶5
,
279 Wis. 2d 325
,
694 N.W.2d 442
.

       ¶5      “Insurance policies are contracts, and they should be interpreted as
such.” Romero v. West Bend Mut. Ins. Co.,
2016 WI App 59, ¶18
,
371 Wis. 2d 478
,
885 N.W.2d 591
.

               Judicial interpretation of a contract, including an insurance
               policy, seeks to determine and give effect to the intent of the
               contracting parties. Insurance policies are construed as they
               would be understood by a reasonable person in the position
               of the insured. However, we do not interpret insurance
               policies to provide coverage for risks that the insurer did not
               contemplate or underwrite and for which it has not received
               a premium.

American Girl, Inc.,
268 Wis. 2d 16, ¶23
 (citations omitted). “We give words used
in [an insurance] policy their plain and ordinary meaning.” Frank v. Wisconsin

       2
           The circuit court treated Secura’s motion for declaratory judgment and summary
judgment as one solely for summary judgment. This is of no matter as either declaratory judgment
or summary judgment is a “proper procedural device[] for resolving insurance disputes,” Young v.
West Bend Mut. Ins. Co.,
2008 WI App 147, ¶6
,
314 Wis. 2d 246
,
758 N.W.2d 196
, and in this
case our standard of review is the same, see Wiegert v. TM Carpentry, LLC,
2022 WI App 28, ¶19
,
403 Wis. 2d 519
,
978 N.W.2d 207
.



                                               3
                                                                               No. 2021AP807




Mut. Ins. Co.,
198 Wis. 2d 689, 694
,
543 N.W.2d 535
 (Ct. App. 1995). “When the
terms are plain and unambiguous, we will construe the contract as it stands.”
Id.
The “[i]nterpretation of an insurance policy is a question of law we review de novo.”
Romero,
371 Wis. 2d 478, ¶18
.

       ¶6     When interpreting an insurance policy, we first “examine the facts of
the insured’s claim to determine whether the policy’s insuring agreement makes an
initial grant of coverage. If it is clear that the policy was not intended to cover the
claim asserted, the analysis ends there.” American Girl, Inc.,
268 Wis. 2d 16, ¶24
.
If, however, the claim triggers an initial grant of coverage under the policy, we then
“examine the various exclusions to see whether any of them preclude coverage of
the present claim.”
Id.
 (emphasis added). “Exclusions are narrowly or strictly
construed against the insurer if their effect is uncertain.”
Id.
 Further,

              [w]e analyze each exclusion separately; the inapplicability
              of one exclusion will not reinstate coverage where another
              exclusion has precluded it. Exclusions sometimes have
              exceptions; if a particular exclusion applies, we then look to
              see whether any exception to that exclusion reinstates
              coverage. An exception pertains only to the exclusion clause
              within which it appears; the applicability of an exception
              will not create coverage if the insuring agreement precludes
              it or if a separate exclusion applies.
Id.
 (emphasis added).




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                                                                                       No. 2021AP807




        ¶7      In this case, the parties stipulated that the insureds’3 claims triggered
an initial grant of coverage. Accordingly, we focus on whether a policy exclusion
precludes coverage of the claims. See
id.

        ¶8      The water exclusion provides4 in relevant part that Secura

                will not pay for loss or damage caused directly or indirectly
                by any of the following. Such loss or damage is excluded
                regardless of any other cause or event that contributes
                concurrently or in any sequence to the loss.

                     .


                     g. Water

                        1. Flood, surface water, waves (including tidal wave
                           and tsunami), tides, tidal water, overflow of any
                           body of water 
 all whether or not driven by wind
                           (including storm surge);

                        2. Mudslide or mudflow;

                        3. Water that backs up or overflows or is otherwise
                           discharged from a sewer, drain, sump, sump pump
                           or related equipment;

                        4. Water under the ground surface pressing on, or
                           flowing or seeping through:

                           a. Foundations, walls, floors or paved surfaces;

                           b. Basements, whether paved or not; or

                           c. Doors, windows or other openings; or


        3
          Norse “incorporate[d] by reference the arguments made by 33 Allenton in its response
brief.” Accordingly, for ease of reading we will hereafter collectively refer to 33 Allenton and
Norse as the “insureds.”
        4
          Each of the policies has an endorsement—the “Water Exclusion Endorsement”—which
modifies the insurance provided under the policies. The endorsement states that its language
“replaces” the water exclusion language in the original policies. Because the endorsement
“expressly states that its provisions should be substituted for those in the main body,” we substitute
the “Water Exclusion Endorsement” language for the original-exclusion language. See Romero v.
West Bend Mut. Ins. Co.,
2016 WI App 59, ¶19
,
371 Wis. 2d 478
,
885 N.W.2d 591
.



                                                  5
                                                                             No. 2021AP807



                    5. Waterborne material carried or otherwise moved
                       by any of the water referred to in Paragraph 1., 3.
                       or 4., or material carried or otherwise moved by
                       mudslide or mudflow.

                     This exclusion applies regardless of whether any of
                     the above, in Paragraphs 1. through 5., is caused by
                     an act of nature or is otherwise caused. An example
                     of a situation to which this exclusion applies is the
                     situation where a dam, levee, seawall or other
                     boundary or containment system fails in whole or in
                     part, for any reason, to contain the water.

(Emphasis added.) So, as relevant, this exclusion provides that Secura “will not pay
for loss or damage caused directly or indirectly by 
 [w]ater under the ground
surface pressing on, or flowing or seeping through: a. Foundations, walls, floors or
paved surfaces; b. Basements 
; or c. Doors, windows or other openings”
“regardless of any other cause or event that contributes concurrently or in any
sequence to the loss” and “regardless of whether” the pressing on/flowing
through/seeping through water “is caused by an act of nature or is otherwise
caused.”

       ¶9     The insureds advance four reasons why this exclusion does not bar
coverage for the damage at issue here. Each of these is easily dispatched.

       ¶10    The insureds first contend this exclusion’s “plain language only
applies to damage caused by water that originates from causes outside the Covered
Premises,” hanging their hat on the “example” in the last paragraph, which they
assert “show[s] that [this exclusion] only relates to water from outside causes or
malfunctions.” The insureds place far too much weight on this example.

       ¶11    To begin, the language of the water exclusion certainly does not say
it “only applies to damage caused by water that originates from causes outside the
Covered Premises.” Additionally, while water from floods, tides, “overflow of any


                                           6
                                                                            No. 2021AP807




body of water,” and mudslides—in the first two paragraphs of the exclusion—would
tend to originate from causes outside a covered premises, such origination cannot
be assumed in connection with “[w]ater that backs up or overflows or is otherwise
discharged from a sewer, drain, sump, sump pump or related equipment”—in the
third paragraph—as sump pumps, for example, are on site.

       ¶12    Furthermore, the sentence immediately preceding the example
sentence indicates that the water exclusion applies “regardless of whether” the water
under the ground surface that presses on/flows through/seeps through foundations,
floors, basements, doors or other openings (or water “that backs up or overflows or
is otherwise discharged from a 
 sump pump” for that matter) is caused “by an act
of nature or is otherwise caused.” (Emphasis added.) There is no need for a
hurricane or tidal wave to cause a levee or seawall to fail for this exclusion to apply.
Here, the pressing/flowing/seeping water was caused “otherwise” than by an act of
nature—i.e., the continuing flow of water after a pipe under the building failed. The
example relied on by the insureds is just that, one example; it does nothing to
undermine the plain language of the water exclusion and in no way limits the
applicability of this exclusion to only circumstances in which the damage is caused
by water that originates from offsite causes.

       ¶13    Second, the insureds claim the water exclusion does not bar coverage
because of language in an exception to one of the more than a dozen other exclusions
in the policies—the wear and tear exclusion. The wear and tear exclusion provides
that Secura

              will not pay for loss or damage caused by or resulting from
              any of the following:

                 
.

              d. (1) Wear and tear;


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                                                                               No. 2021AP807



                 (2) Rust or other corrosion, decay, deterioration 
;

                    .


                 (7) The following causes of loss to personal property:

                     (a) Dampness or dryness of atmosphere; 
.

The parties have stipulated that the pipe at issue in this case failed due to “one or
more of the perils listed in” this exclusion.

       ¶14    Immediately       following       the   seven     wear-and-tear-exclusion
paragraphs, however, the policies provide an exception to this exclusion: “But if an
excluded cause of loss that is listed in []d.(1) through (7) results in a ‘specified cause
of loss’ 
 we will pay for the loss or damage caused by that ‘specified cause of
loss’
.” (Emphasis added.) The insureds refer to this language as the “SCL
Provision.” “Specified causes of loss” is defined as “fire; lightning; explosion; 

water damage,” and “water damage” means

              accidental discharge or leakage of water or steam as the
              direct result of the breaking apart or cracking of a plumbing,
              heating, air conditioning or other system or appliance (other
              than a sump system including its related equipment and
              parts), that is located on the described premises and contains
              water or steam.

(Emphasis added.) So, as relevant, the wear and tear exclusion provides that Secura
“will not pay for loss or damage caused by or resulting from 
 [w]ear and tear,”
but the exception provides that if the wear and tear resulted in “accidental discharge
or leakage of water 
 as the direct result of the breaking apart or cracking of a
plumbing 
 system 
 that is located on the 
 premises,” Secura “will pay for the
loss or damage caused by that” discharge or leakage of water.

       ¶15    Focusing attention on this exception to the wear and tear exclusion,
the insureds assert that this exception is “more specific” than the water exclusion



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                                                                                       No. 2021AP807




and, quoting Scheidler v American Family Mutual Insurance Co.,
2003 WI App 159, ¶7
,
265 Wis. 2d 872
,
667 N.W.2d 367
, state that “when general and specific
provisions are in conflict, the specific provision prevails.” The insureds contend
that the exception to the wear and tear exclusion “therefore trumps the Water
Exclusion.” We need not decide which language is “more specific” because the
water exclusion unambiguously bars coverage even if another “cause or event 

contributes concurrently or in any sequence to the loss”—regardless of whether that
other event or cause is covered. (Emphasis added.) Here, “[w]ater under the ground
surface pressing on, or flowing or seeping through” foundations, walls, floors,
basements, doors, or other openings caused the damage at issue, and thus the water
exclusion applies. This is so “regardless” of the fact that water escaping through
the broken pipe (relevant to the exception to the wear and tear exclusion)—whether
considered a prior “cause” or a prior “event”—also “contribute[d] 
 to the loss.”5

        ¶16     Furthermore, and importantly, in light of controlling language in our
supreme court’s American Girl decision, more specific or not, the exception to the
wear and tear exclusion simply does not affect the water exclusion. In American
Girl, our supreme court stated:

                We analyze each exclusion separately; the inapplicability of
                one exclusion will not reinstate coverage where another

        5
            The insureds go so far as to assert that there “was only one cause of the Covered Premises
Damage”—“a water pipe under the office building broke apart.” We disagree. Clearly, the damage
at issue would not have occurred if the pipe had not broken apart; thus, that was “a” cause of the
damage. But there can be no dispute that the continued flowing of water through the pipe after it
had failed and that water escaping from the pipe into the surrounding subsurface soil also was a
cause of the damage. Had the failure of the pipe been timely detected and the water flowing through
it immediately shut off, for example, there would not have been any damage to the building or its
contents. That did not happen. Then, the water in the subsurface soil did not simply remain in the
soil but it successfully flowed/seeped through the foundation, walls, floors, and/or basement. Had
the escaping water not succeeded in penetrating into the building, there would have been either no
damage or much more limited damage. Without all three of these causes and/or events occurring,
the insureds would not have sustained their damages.



                                                  9
                                                                               No. 2021AP807



              exclusion has precluded it. Exclusions sometimes have
              exceptions; if a particular exclusion applies, we then look to
              see whether any exception to that exclusion reinstates
              coverage. An exception pertains only to the exclusion clause
              within which it appears; the applicability of an exception
              will not create coverage if the insuring agreement precludes
              it or if a separate exclusion applies.

American Girl,
268 Wis. 2d 16, ¶24
 (emphasis added). Thus, as long as one
exclusion in a policy excludes coverage—as the water exclusion does here—it does
not matter that another exclusion does not exclude coverage, whether due to an
exception or otherwise. Stated differently, assuming the exception to the wear and
tear exclusion makes that exclusion inapplicable so that coverage is not excluded
thereunder, that is the limit of the exception’s impact; it does nothing to undermine
the fact that the water exclusion excludes coverage for the damage at issue.

       ¶17    In their briefing, the insureds rely heavily upon the so-called
“interplay of the SCL [“specified causes of loss”] Provision and Water Exclusion.”
While the insureds argue as if the “SCL Provision” is on par with the water
exclusion, it is not. Though the insureds’ briefing is clearly designed to create the
sense that the “SCL Provision” has some significance beyond what it does, in the
end, that provision is merely language in an exception to the wear and tear exclusion
and thus affects only that exclusion; it has no effect on the many other exclusions in
the policy, including the water exclusion. There simply is no “interplay” between
the water exclusion and the exception/“SCL Provision” in the wear and tear
exclusion as American Girl makes clear that “[a]n exception pertains only to the
exclusion clause within which it appears.”
Id.
 (emphasis added). And, as American
Girl further instructs, an exception “will not create coverage 
 if a separate
exclusion”—such as the water exclusion here—“applies.” See
id.




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                                                                        No. 2021AP807




      ¶18    Third, the insureds claim “a reasonable insured 
 would expect
coverage to exist under the [policies] for the Covered Premises Damage.” The
insureds do not put much effort into developing this issue, affording it only six
specific sentences of attention. That said, we conclude that a reasonable insured
would read the policies as we do because both the language therein and the law as
explained in American Girl are plain and unambiguous.

      ¶19    Lastly, the insureds contend the relevant portions of the policies are
ambiguous and thus we should interpret them in their favor. More specifically, they
assert that because of the “SCL Provision” in the exception to the wear and tear
exclusion, the water exclusion is ambiguous where, as here, the damage is caused
by water from a “damaged plumbing system[] on the Covered Premises.” There is
no ambiguity. As we have discussed, American Girl informs that an exception that
might restore coverage under one exclusion does not trump another exclusion that
bars coverage. Thus, here, the exception to the wear and tear exclusion applies only
to that exclusion and in no way undermines the effect of the water exclusion.

      ¶20    For the foregoing reasons, we conclude that the policies exclude
coverage for the damages sought by 33 Allenton and Norse. We reverse and remand
to the circuit court to enter declaratory and summary judgment in favor of Secura.




             By the Court.—Order reversed and cause remanded with directions.




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