Title: Gregory A. Liebovich v. Minnesota Insurance Company

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2008 WI 75 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
CASE NO.: 
2006AP405 
COMPLETE TITLE: 
 
 
Gregory A. Liebovich, 
          Plaintiff-Appellant, 
     v. 
Minnesota Insurance Company and American 
International Insurance Company, 
          Defendants-Respondents-Petitioners. 
 
 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2007 WI App 28 
Reported at: 299 Wis. 2d 331, 728 N.W.2d 357 
(Ct. App. 2007-Published) 
 
 
OPINION FILED: 
July 1, 2008   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
November 29, 2007   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Walworth   
 
JUDGE: 
Michael S. Gibbs   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
        
 
NOT PARTICIPATING: ZIEGLER, J., did not participate.   
 
 
 
ATTORNEYS: 
 
For 
the 
defendants-respondents-petitioners 
there 
were 
briefs by Michael A. Mesirow, Patti J. Kurth, and Kasdorf, Lewis 
& Swietlik, S.C., Milwaukee, and oral argument by Michael A. 
Mesirow. 
 
For the plaintiff-appellant there was a brief by Jon P. 
Axelrod, Megan A. Senatori, Jacob P. Westerhof, and DeWitt Ross 
& Stevens S.C., Madison, and oral argument by Jon P. Axelrod. 
 
 
 
2008 WI 75
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2006AP405  
(L.C. No. 
2005CV745) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Gregory A. Liebovich, 
 
          Plaintiff-Appellant, 
 
     v. 
 
Minnesota Insurance Company and American 
International Insurance Company, 
 
          Defendants-Respondents-Petitioners. 
 
FILED 
 
JUL 1, 2008 
 
David R. Schanker 
Clerk of Supreme Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed 
and, as modified, cause remanded.   
 
¶1 
LOUIS B. BUTLER, JR., J.   This case involves an 
insurance provider's duty to defend the holder of a broad 
homeowners' liability policy against claims that he built his 
house too close to a shoreline in violation of a restrictive 
covenant.  Gregory A. Liebovich (Liebovich) sued his insurers, 
Minnesota Insurance Company and American International Insurance 
No. 
2006AP405   
 
2 
 
Company (AIG),1 after they refused to defend him in a lawsuit 
filed against Liebovich by some of his neighbors for violating a 
covenant with a 125-foot setback restriction.  AIG filed a 
motion for summary judgment, which the circuit court granted.  
The court of appeals affirmed in part, reversed in part, and 
remanded, concluding in a published opinion2 that AIG had a duty 
to defend Liebovich, and that AIG could have sought a judicial 
determination of its responsibilities if it felt the policy did 
not provide coverage, but instead AIG unilaterally breached its 
duty to defend.   
¶2 
Upon review, we agree with the court of appeals' 
conclusion that AIG's unilateral decision to deny liability 
coverage to Liebovich was a violation of its duty to defend.  
That duty was established by the filing of a complaint against 
Liebovich which, contrary to AIG's arguments, contained the 
requisite allegations of an occurrence, injury, and damages 
triggering AIG's responsibilities under the policy.  Therefore, 
AIG's 
unilateral 
decision 
to 
deny 
liability 
coverage 
to 
Liebovich, 
without 
first 
turning 
to 
the 
well-established 
procedures described in Elliott v. Donahue, 169 Wis. 2d 310, 485 
                                                 
1 A stipulation filed by the parties on November 17, 2005, 
notes 
that 
Minnesota 
Insurance 
Company 
and 
American 
International Insurance Co. are both members of the American 
International Group (AIG) Private Client Group.  Both are also 
named as parties in this action.  We will use the "AIG" 
designation when referring to the two companies jointly.  See 
also infra, ¶9 n.6. 
2 Liebovich v. Minnesota Insurance Co., 2007 WI App 28, 299 
Wis. 2d 331, 728 N.W.2d 357. 
No. 
2006AP405   
 
3 
 
N.W.2d 
403 
(1992), 
Newhouse 
v. 
Citizens 
Security 
Mutual 
Insurance Co., 176 Wis. 2d 824, 501 N.W.2d 1 (1993), and Baumann 
v. Elliott, 2005 WI App 186, 286 Wis. 2d 667, 704 N.W.2d 361, 
and despite the allegations of an occurrence, injury, and 
damages in the Halls' complaint, was a breach of AIG's duty to 
defend Liebovich.  We further conclude that the intentional acts 
exclusion 
in 
Liebovich's 
policy 
does 
not 
justify 
AIG's 
abandonment of its policyholder because the neighbors' complaint 
does 
not 
allege 
that 
Liebovich 
intended 
to 
harm 
them.  
Consequently, we hold that AIG had a duty to defend Liebovich 
and that it breached that duty.  We affirm the court of appeals' 
decision, adding to the remand directions that the circuit court 
should additionally address Liebovich's indemnification claim 
against AIG on remand.   
I 
¶3 
Liebovich and his neighbors, Stephen R. Hall, Judith 
K. Hall, and Cedric Blazer,3 own property with lake frontage on 
the south shore of Geneva Lake.  When Liebovich built his home, 
the Halls filed a complaint4 against him alleging he had violated 
a 125-foot setback covenant deed restriction by building a 
portion of his new home too close to the shore of Geneva Lake.  
¶4 
The first two causes of action in the Halls' complaint 
allege that Liebovich had constructive and actual knowledge of 
                                                 
3 We refer to all three collectively as "the Halls."   
4 In this opinion, we refer to the second amended complaint 
filed by the Halls in their action against Liebovich, which 
incorporates by reference a previous amended complaint.   
No. 
2006AP405   
 
4 
 
the restriction, but violated it intentionally and in willful 
disregard 
of 
his 
neighbors' 
rights, 
aggrieving 
them 
and 
entitling them to a writ requiring removal of the portion of his 
home violating the restriction.  The form of relief sought for 
the first two causes of action includes a declaration that the 
setback restriction is valid, enforceable, and applicable to 
Liebovich's property; an injunction requiring compliance with 
the restriction; a writ of mandamus "directing Liebovich to take 
all necessary action, including, but not limited to, razing and 
removal of that portion of the single-family dwelling located on 
the Liebovich property which violates the 125 foot building 
setback 
restriction"; 
repayment 
of 
legal 
costs 
and 
disbursements; 
judgment 
under 
Wis. 
Stat. 
§ 844.20(1) 
and 
(2)(2003-04),5 including injunctive relief and damages; and other 
relief the court deems just or equitable.  
¶5 
The third cause of action requests reformation of a 
1968 affidavit and notice of covenant restrictions recorded with 
                                                 
5 Wisconsin Stat. § 844.20 provides:  
(1) The judgment shall award the relief, legal or 
equitable, 
to 
which 
the 
plaintiff 
is 
entitled 
specifically, and without limitation, interference, 
encroachment, 
physical 
injury 
or 
waste 
may 
be 
enjoined; damages may be awarded separately, or in 
addition. 
(2) Abatement 
by 
the 
sheriff 
of 
any 
nuisance, 
structure or encroachment may be ordered by the 
judgment. 
All subsequent references to the Wisconsin Statutes are to the 
2003-04 version unless otherwise indicated. 
No. 
2006AP405   
 
5 
 
the register of deeds along with the deed for Liebovich's 
property.  The Halls claim that the affidavit was executed to 
give notice of the 125-foot setback covenant restriction, but 
that it mistakenly described Liebovich's property as containing 
a "Form 2" restriction which allowed construction within 125 
feet of the Geneva Lake shore at the low water line, when in 
fact, the deed accompanying the property contained the "Form 1" 
restriction prohibiting any structures less than 125 feet from 
the shore.  Along with requesting reformation, the third cause 
of action requests that the reformed version of the affidavit be 
recorded with the Register of Deeds for Walworth County, 
reimbursement for costs and disbursements, and other relief the 
court deems just and equitable.  
¶6 
Liebovich is the holder of a "Private Client Group" 
homeowner's insurance policy (PCG policy), the relevant language 
of which is discussed later in this opinion.  Liebovich asked 
AIG to defend and indemnify him in the lawsuit, based on the 
liability provisions of the PCG policy.  In response, AIG sent a 
denial letter stating that it was refusing coverage because the 
Halls' second amended complaint alleges that Liebovich's conduct 
was intentional and in willful disregard of his neighbors' 
rights.  As such, the letter stated, coverage is precluded by 
the policy's "intentional acts" exclusion, and by what AIG 
described as the lack of a request for damages in the Halls' 
complaint.  
¶7 
The Halls won their lawsuit and Liebovich was ordered 
to pay them $10,000 in damages along with statutory costs, 
No. 
2006AP405   
 
6 
 
disbursements, and interest.  He was also enjoined from further 
violations of the covenant and from building certain additions 
or rebuilding the present encroachment if it is ever torn down.  
However, the court stopped short of granting an injunction 
requiring Liebovich to tear down the part of the house violating 
the covenant, adding a handwritten note to its order that "[i]t 
is further ordered, adjudged, and decreed that it would be 
inequitable to . . . Liebovich to grant the injunctive relief 
requested."   
¶8 
Both the Halls and Liebovich appealed.  The court of 
appeals affirmed the circuit court's decision, and this court 
denied the Halls' petition for review.  Hall v. Liebovich Living 
Trust, 2007 WI App 112, ¶2, 300 Wis. 2d 725, 731 N.W.2d 649, 
review denied, 2007 WI 114, 302 Wis. 2d 106, 737 N.W.2d 432 
(unpublished table decision). 
¶9 
On August 24, 2005, Liebovich filed suit against AIG6 
for the company's failure to defend and indemnify him, alleging 
breach of AIG's contractual obligations to him and bad faith.  
Both parties moved for summary judgment.  In its motion, AIG 
argued that no coverage exists under the PCG policy for the 
causes of action alleged within the four corners of the Halls' 
                                                 
6 The original complaint listed only Minnesota Insurance 
Company as the defendant.  On November 17, 2005, the parties 
stipulated to the addition of American International Insurance 
Company as a co-defendant.  The stipulation stated that the 
previously filed pleadings were deemed to apply to both 
Minnesota Insurance Company and American International Insurance 
Company.  See supra, ¶1 n.1. 
No. 
2006AP405   
 
7 
 
complaint.  Liebovich responded that AIG had breached its duty 
to defend him and failed to follow the well-established 
procedures allowing insurance companies to seek a judicial 
determination about contested coverage rather than denying 
coverage without such a determination.  
¶10 At a January 6, 2006, hearing, the circuit court, 
Honorable Michael S. Gibbs presiding, concluded that AIG did not 
breach a duty to defend because the Halls' allegation of being 
aggrieved does not rise to the level of the type of injury 
required for coverage.  The court further concluded that the 
Halls did not allege damages, and that Liebovich's intent to 
build his house made the policy's intentional acts exclusion 
applicable.  The court granted AIG's motion for summary judgment 
and denied Liebovich's motion for summary judgment.   
¶11 Liebovich appealed.  The court of appeals affirmed the 
dismissal of Liebovich's bad faith claim, while reversing the 
circuit court's conclusion that AIG did not have a duty to 
defend Liebovich and remanding for calculation of damages, 
costs, and fees.  Liebovich v. Minnesota Ins. Co., 2007 WI App 
28, ¶¶1, 17-18, 299 Wis. 2d 331, 728 N.W.2d 357.   
¶12 In its analysis of the duty to defend issue, the court 
of appeals rejected AIG's arguments that the Halls' complaint 
does not allege a personal injury or damages.  Id., ¶¶9-11.  The 
court ruled that the implicit allegation of a wrongful entry and 
explicit allegation of being aggrieved were sufficient to 
satisfy the personal injury requirement, and that damages were 
explicitly claimed along with the facts giving rise to those 
No. 
2006AP405   
 
8 
 
damages.  Id.  The court also rejected AIG's argument that there 
was no occurrence alleged, explaining that the PCG policy does 
not limit the definition of "occurrence" to accidents, but also 
includes offenses, and that AIG failed to establish why 
Liebovich's conduct was not such an offense.  Id., ¶12.  
Finally, the court rejected AIG's invocation of the PCG policy's 
intentional act exclusion, concluding that the exclusion applies 
only when the insured intends or should have known that some 
harm would follow from his actions, which was not the case here.  
Id., ¶¶13-17.  The court concluded on these grounds that AIG had 
a duty to defend Liebovich and had breached that duty.  Id., 
¶17.   
¶13 AIG filed a petition for review, and we accepted 
review.  Our review is limited to a determination of whether AIG 
had, and breached, a duty to defend Liebovich in the lawsuit 
filed against him by the Halls.7  We conclude that the four 
corners of the Halls' complaint contain allegations of the type 
of injury, damages, and occurrence required for coverage under 
Liebovich's policy and that the intentional acts exclusion in 
the policy does not bar coverage.  We further conclude that AIG 
had a duty to defend Liebovich, and AIG breached that duty. 
                                                 
7  Neither lower court addressed Liebovich's indemnification 
claim, 
and 
therefore 
we 
do 
not 
reach 
the 
issue 
of 
indemnification either.  Because the issue is still viable upon 
reversal of the circuit court's order and judgment but requires 
a trial for resolution, we include in our remand directions for 
the circuit court to address the indemnification issue along 
with complying with the other directions from this court.   
No. 
2006AP405   
 
9 
 
II 
¶14 We review summary judgment decisions de novo, applying 
the same methodology as the circuit court and the court of 
appeals.  See Green Springs Farms v. Kersten, 136 Wis. 2d 304, 
314-15, 401 N.W.2d 816 (1987); Wis. Stat. § 802.08(2).  A motion 
for summary judgment may be granted only when "the pleadings, 
depositions, answers to interrogatories, and admissions on file, 
together with the affidavits, if any, show that there is no 
genuine issue as to any material fact and that the moving party 
is entitled to judgment as a matter of law."  Wis. Stat. 
§ 802.08(2). 
¶15 In this case, neither party claims there is a genuine 
issue 
of 
material 
fact. 
 
The 
issue 
before 
us 
is 
the 
applicability 
of 
Wisconsin's 
law 
concerning 
an 
insurance 
company's duty to defend to the facts of this case.  Whether the 
circuit 
court 
correctly 
interpreted 
and 
applied 
the 
law 
pertaining to an insurer's duty to defend is an issue we review 
de novo.  See Welin v. Am. Family Mut. Ins. Co., 2006 WI 81, 
¶16, 292 Wis. 2d 73, 717 N.W.2d 690.   
¶16 The procedures and standard of review applicable in 
duty to defend cases are well-established.  "The duty to defend 
is triggered by the allegations contained within the four 
corners of the complaint."  Newhouse, 176 Wis. 2d at 835 (citing 
Elliott, 169 Wis. 2d at 320-21; Grieb v. Citizens Cas. Co., 33 
Wis. 2d 552, 557-58, 148 N.W.2d 103 (1967)).  An insurer has a 
duty to defend when there are allegations in a complaint that, 
if proven, "would give rise to recovery under the terms and 
No. 
2006AP405   
 
10 
 
conditions of the insurance policy. . . .  The duty of defense 
depends on the nature of the claim and has nothing to do with 
the merits of the claim."  Elliott, 169 Wis. 2d at 320-21 
(citations omitted).    
¶17 The 
interpretation 
of 
an 
insurance 
policy 
is 
ordinarily a question of law, which we review de novo.  See 
Welin, 292 Wis. 2d 73, ¶16.  We will interpret a policy's 
language so that it comports with the common and ordinary 
meaning it would have in the mind of a reasonable lay person in 
the position of the insured.  Cieslewicz v. Mut. Serv. Cas. Ins. 
Co., 84 Wis. 2d 91, 97-98, 267 N.W.2d 595 (1978).  If the 
language of a policy is unambiguous, and its terms plain on 
their face, "the policy should not be rewritten by construction 
to bind the insurer to a risk it was unwilling to cover, and for 
which it was not paid."  Garriguenc v. Love, 67 Wis. 2d 130, 
135, 226 N.W.2d 414 (1975).   
¶18 However, if the language of a policy is ambiguous, 
susceptible of more than one reasonable interpretation, we will 
construe it narrowly, against the insurer, and in favor of 
coverage.  Cardinal v. Leader Nat'l Ins. Co., 166 Wis. 2d 375, 
382, 480 N.W.2d 1 (1992).  Consequently, any doubts about the 
duty to defend must be resolved in favor of the insured.  
Elliott, 169 Wis. 2d at 321.   
¶19 With these principles in mind, we will confine our 
inquiry into AIG's alleged duty to defend to the four corners of 
the Halls' complaint, read in conjunction with the PCG insurance 
policy issued by AIG to Liebovich.   
No. 
2006AP405   
 
11 
 
III 
¶20 AIG raises three primary issues, which we will address 
separately:  (1) whether the Halls allege within the four 
corners of the complaint a personal injury or occurrence within 
the meaning of Liebovich's PCG policy; (2) whether the complaint 
alleges damages; and (3) whether coverage is otherwise precluded 
by the policy's intentional acts exclusion in Liebovich's PCG 
policy.  
A 
¶21 AIG's arguments that the Halls' complaint does not 
allege a "personal injury" and that it does not allege  an 
"occurrence" 
as 
defined 
by 
Liebovich's 
PCG 
policy 
are 
interrelated.  Because AIG premises its claim that there is no 
occurrence alleged in the Halls' complaint upon its parallel 
claim that the complaint does not allege a personal injury, the 
latter issue is dispositive of the former issue.  We therefore 
address the two issues together.   
¶22 The 
general 
liability 
coverage 
provision 
of 
Liebovich's PCG policy provides in relevant part:  
A. 
Insuring Agreement 
We will pay, on your behalf, damages an insured 
person is legally obligated to pay for personal 
injury or property damage caused by an occurrence 
covered by this policy anywhere in the world, 
unless stated otherwise or an exclusion applies. 
 . . . . 
No. 
2006AP405   
 
12 
 
 
C. 
Defense Coverage and Claim Expense 
We will pay the costs to defend an insured person 
against any suit seeking covered damages for 
personal injury or property damage, even if the 
suit is false, fraudulent or groundless. 
¶23 The PCG policy proceeds to define "occurrence" as 
including both accidents and offenses.  The inclusion of non-
accidental offenses along with accidents in the definition of 
occurrence renders the PCG policy's coverage significantly 
broader than that provided in standard policies such as 
Commercial General Liability (CGL) policies.  Standard CGL 
policies provide general coverage only for those occurrences 
which can be classified as accidents.  See Everson v. Lorenz, 
2005 WI 51, ¶¶12, 15, 21-22, 280 Wis. 2d 1, 695 N.W.2d 298; 
Doyle v. Engelke, 219 Wis. 2d 277, 282, 289-90, 580 N.W.2d 245 
(1998); I Susan J. Miller & Philip Lefebvre, Miller's Standard 
Insurance Policies Annotated, 419 (4th ed. 1994).   
¶24 The inclusion of non-accidental offenses along with 
accidents in Liebovich's PCG policy's definition of "occurrence" 
is just one example of the significantly broader coverage 
provided by that policy.  The PCG policy also defines "personal 
injury" in the following comparatively broad terms: 
Personal injury means injury, including bodily injury 
or mental harm arising out of any of the following 
acts:  
 
a. 
Bodily injury; 
b. 
Wrongful detention, false imprisonment or 
false arrest; 
No. 
2006AP405   
 
13 
 
c. 
Shock, emotional distress, mental injury; 
 
d. 
Invasion of privacy; 
 
e. 
Defamation, libel or slander; 
 
f. 
Malicious prosecution; 
 
g. 
Wrongful entry or eviction; or 
h. 
Assault and battery when committed with the 
intent of protecting persons. 
(Emphasis added.)  
¶25 AIG and Liebovich offer different interpretations of 
the phrase "injury, including bodily injury or mental harm 
arising out of any of the following acts."  While Liebovich, in 
essence, interprets the phrase as meaning "injury, including but 
not limited to," AIG interprets it as "injury, including and 
limited to."  Under AIG's interpretation, "injury" is therefore 
synonymous with "bodily injury or mental harm arising out of any 
of the following acts. . . ."   
¶26 We 
conclude 
that 
AIG's 
interpretation 
of 
this 
provision does not comport with the unambiguous text of the 
provision.  The policy's definition of "personal injury" is not, 
on its face or otherwise, limited to only those injuries listed.  
The presence of a comma and the word "including" in the phrase 
"injury, including" indicates that the word "including" is not 
meant to reference an exhaustive list.   
¶27 This plain text meaning of the phrase "injury, 
including" is reinforced by reading Liebovich's policy as a 
whole, as we must in insurance interpretation cases.   See Laabs 
v. Chicago Title Ins. Co., 72 Wis. 2d 503, 510, 241 N.W.2d 434 
No. 
2006AP405   
 
14 
 
(1976).  In Liebovich's policy, the definition of "personal 
injury" is not the only provision that employs a comma followed 
by the word "including" denoting a non-exhaustive list.  The 
policy's definition of "occurrence" is similarly structured: 
a. 
A loss or an accident, including continuous or 
repeated 
exposure 
to 
substantially 
the 
same 
general harmful conditions, which occurs during 
the Policy Period and results in personal injury 
or property damages; or 
b. 
An 
offense, 
including 
a 
series 
of 
related 
offenses, committed during the Policy Period that 
results in personal injury or property damage. 
For the sake of comparison, we observe that AIG does not argue 
that the first half of the "occurrence" definition, describing 
"[a] loss or an accident, including continuous or repeated 
exposure 
to 
substantially 
the 
same 
general 
harmful 
conditions . . ." limits coverage to only those accidents in the 
form of continuous or repeated exposure to harmful conditions.  
Nor does AIG argue that the second half of the definition, 
describing 
"[a]n 
offense, 
including 
a 
series 
of 
related 
offenses," limits coverage to only those offenses which occur as 
part of a series of related offenses.   
¶28 The reason AIG does not make a similar argument 
regarding the meaning of occurrence is likely because these 
provisions, using similar "including" clauses as that found in 
the "personal injury" definition, clearly do not limit the 
meaning of the words being defined to those examples that follow 
the word "including."  From the text of the similarly structured 
definition of "personal injury" in Liebovich's PCG policy, it is 
No. 
2006AP405   
 
15 
 
equally evident that the policy uses the word "including" in the 
personal 
injury 
definition 
in 
a 
similar 
inclusive, 
not 
exclusive, manner, merely denoting some types of covered acts 
without purporting to set forth an exhaustive list.   
¶29 The broad nature of the PCG policy further illustrates 
that the phrase, "injury, including" in the definition of 
"personal injury" is not synonymous with the phrase "injury 
including and limited to," or "only those injuries which arise 
out of the following acts. . . ."  As we have explained, the 
policy in this case is substantially broader in scope than 
standard CGL policies.  This is true not just of the PCG 
policy's comparatively broader definition of occurrence, but 
also of its more expansive definition of personal injury.  
¶30 Standard CGL policies generally define personal injury 
as "injury, other than 'bodily injury,' arising out of one or 
more of the following offenses."  I Susan J. Miller & Philip 
Lefebvre, Miller's Standard Insurance Policies Annotated, 419 
(4th ed. 1994).  In contrast, Liebovich's PCG policy defines 
personal injury as "injury, including bodily or mental harm 
arising out of any of the following acts. . . ."  Viewed side-
by-side, the different personal injury definitions reveal the 
comparatively broader language of PCG policies: 
 
CGL Definition: 
 
Injury, 
other 
than 
bodily 
injury, 
arising 
out of one or more of 
the following offenses. 
    PCG Definition: 
 
Injury, including bodily or 
mental harm arising out of 
any of the following acts 
. . . . 
No. 
2006AP405   
 
16 
 
 
Specifically, the above comparison of the text of CGL and PCG 
definitions of personal injury indicates that the comparative 
lack of a comma in Liebovich's PCG policy coupled with the word 
"including" precludes reasonably reading the list of acts after 
the word "including" as an exclusive list; even injuries not 
listed are potentially covered. 
¶31 Not only is the placement of a comma after the word 
"injury" in CGL policies, in contrast with in PCG policies, 
significant for the reasons we have just discussed, but there is 
another significant difference between the use of commas in 
standard CGL policies and in Liebovich's PCG policy.  As the 
side-by-side language in the previous paragraph shows, another 
difference in the use of commas that affects the meaning of the 
personal injury definition in each type of policy is the 
difference between the absence of a comma before the phrase 
"arising out of" in the Liebovich policy, and the contrasting 
presence of such a comma in the standard CGL policy.  Under a 
plain text reading of CGL policy's language that takes into 
account the function of the comma, the phrase "arising out of" 
clearly modifies "injury" in CGL policies.  Under a plain text 
reading of Liebovich's PCG policy, in contrast, the phrase 
"arising out of" modifies the more narrow category of "bodily or 
mental harm" in the PCG policy.  The absence of a comma before 
the phrase "arising out of" in the Liebovich policy indicates 
that the PCG policy, unlike a CGL policy, does not require an 
No. 
2006AP405   
 
17 
 
injury be in the form of bodily or mental harm arising out of 
specifically listed acts in order to be a covered injury.8   
¶32 Finally, as we have explained, insurance policies are 
construed strictly in favor of coverage, and ambiguities are to 
be construed against the drafter.  See Cardinal, 166 Wis. 2d at 
382.  As such, while we conclude that Liebovich's interpretation 
of the PCG policy's definition of "injury" is reasonable, 
comporting with the text of the policy and the commonly 
understood 
inclusive 
meaning 
of 
"injury," 
even 
if 
AIG's 
interpretation were reasonable as well, we would still construe 
the policy in favor of coverage.  When there are two competing 
interpretations of a policy which are conflicting but both are 
reasonable, we defer to the interpretation of the insured, not 
the drafter.  See id.   
¶33 There are two particular provisions of the Halls' 
complaint that may reasonably be construed as alleging injury.  
Paragraph 27 of the complaint alleges that the house Liebovich 
built 
"violates 
the 
125 
foot 
building 
setback 
restriction . . . . 
 
Hall 
and 
Blazer 
are 
aggrieved 
by 
Liebovich's violation of the building setback restriction."  
Paragraph 29 alleges that the construction violating the setback 
                                                 
8 Another difference revealed by a side-by-side comparison 
of the CGL and PCG policies' personal injury definitions is that 
CGL policies explicitly exclude bodily injury, while the PCG 
policy explicitly includes bodily injury.  However, that 
distinction is not pertinent to our present analysis, other than 
to provide another illustration of the comparatively broad 
definition of "personal injury" in PCG policies. 
No. 
2006AP405   
 
18 
 
restriction "has interfered with the interests of Hall and 
Blazer in and to their neighboring real property."  
¶34 In support of his argument that the "aggrieved" 
language of paragraph 27 is sufficient to satisfy the injury 
requirement of his PCG policy, Liebovich cites United States v. 
Security Management Co., 96 F.3d 260 (7th Cir. 1996).  In that 
case, the court found coverage where the complaints alleged 
being "aggrieved."  Id. at 262, 268.  The court held that "since 
the complaints requested an award of 'such damages as would 
fully compensate aggrieved persons for damages caused by the 
defendants' discriminatory conduct,' we conclude that the 
complaints should be impliedly read as requesting compensation 
for mental injury."  Id. at 268.  Liebovich argues that the same 
principle applies in this case.   
¶35 In reply, AIG distinguishes Security Management as 
involving an allegation of discrimination.  AIG correctly points 
out that in Security Management, the court explained that a 
complaint need not expressly allege emotional harm, particularly 
in cases involving racial discrimination, which is presumptively 
degrading and humiliating.  Id.  AIG appropriately notes that 
discrimination is generally, by its nature, more likely to be 
emotionally damaging than building a house too close to a 
lakefront.  
¶36 However, we disagree with the implication of AIG's 
arguments that the allegation of being "aggrieved" can never 
denote injury in contexts of harms such as covenant breaches.  
AIG argues that "aggrieved" means no more than a general 
No. 
2006AP405   
 
19 
 
invocation of legal standing, but this argument underscores the 
symbiotic relationship between being "aggrieved" and being 
"injured":  it is through the demonstration of injury that 
standing is conferred.  For example, it is well established that 
for purposes of establishing standing to appeal a judgment, an 
"aggrieved party" is defined in part as "one having an 
interest . . . which is injuriously affected by the judgment."  
See, e.g., Muriel K. v. Milwaukee County, 2002 WI 27, ¶16, 251 
Wis. 2d 10, 640 N.W.2d 773; Jindra v. Diederich Flooring, 181 
Wis. 2d 579, 611, 511 N.W.2d 855 (1994); Pasch v. DOR, 58 Wis. 
2d 346, 357, 206 N.W.2d 157 (1973); Greenfield v. Joint County 
School Comm., 271 Wis. 442, 447, 73 N.W.2d 580 (1955).   
¶37 Cases addressing standing are not the only examples of 
the nearly synonymous relationship of the terms "aggrieved" and 
"injured."  On occasion, we have found it useful to turn to the 
dictionary to ascertain common and ordinary meanings of words.  
See, e.g., State v. Polashek, 2002 WI 74, ¶19, 253 Wis. 2d 527, 
646 N.W.2d 330.  In this case, we observe that the Webster's 
Dictionary definition of "aggrieve" includes the synonymous 
phrase 
"to 
inflict 
injury 
upon." 
 
Webster's 
Third 
New 
International Dictionary 41 (3d ed. 1986).  This definition of 
"aggrieved" as a word that is interchangeable with "injured" has 
also been commonly employed in our case law addressing issues 
beyond standing.  See Lestina v. West Bend Mut. Ins. Co., 176 
Wis. 2d 901, 911, 501 N.W.2d 28 (1993)(observing "a judicial 
trend toward holding sports-related injuries actionable only 'if 
the aggrieved person demonstrates gross negligence or reckless 
No. 
2006AP405   
 
20 
 
disregard by the defendant'")(citation omitted)(emphasis added); 
Rimes v. State Farm Mut. Auto. Ins. Co., 106 Wis. 2d 263, 275, 
316 N.W.2d 348 (1982)("Under Wisconsin law the test of wholeness 
depends upon whether the insured has been completely compensated 
for all the elements of damages . . . .  The injured or 
aggrieved party is not made whole unless all his damages arising 
out of the tort have been fully compensated.")(emphasis added); 
Village of Niagara v. Town of Niagara, 209 Wis. 529, 533, 245 
N.W. 699 (1932)(describing "remedies for an aggrieved or injured 
municipality entitled to an apportionment of taxes")(emphasis 
added).   
¶38 In addition, a violation of rights, as alleged by the 
Halls' complaint, may constitute an injury.  Turning to the 
dictionary for guidance, we observe that a common definition of 
injury is "an act that damages, harms, or hurts . . .[;] a 
violation of another's rights for which the law allows an action 
to recover damages . . . ."  Webster's Third New International 
Dictionary 1164 (3d ed. 1986).  Black's Law Dictionary similarly 
defines "injury" as follows: 
1. The violation of another's legal right, for which 
the law provides a remedy; a wrong or injustice.  See 
WRONG.  2.  Scots law.  Anything said or done in 
breach of a duty not to do it, if harm results to 
another in person, character, or property.  Injuries 
are divided into real injuries (such as wounding) and 
verbal injuries (such as slander).  They may be 
criminal wrongs (as with assault) or civil wrongs (as 
with defamation).  3.  Any harm or damage.  Some 
authorities distinguish harm from injury, holding that 
while harm denotes any personal loss or detriment, 
injury involves an actionable invasion of a legally 
protected interest.  
No. 
2006AP405   
 
21 
 
Black's Law Dictionary 801 (8th ed. 2004).  In this case, the 
Halls' complaint clearly alleges a violation of their interests 
and rights, a breach of a covenant resulting in harm, and an 
actionable invasion of a legally protected interest.  As such, 
the complaint alleges "injury" within the dictionary meaning of 
that word. 
¶39 In this case, the Halls complained not just of being 
aggrieved generally, but also of interference with their 
property interests specifically.  The Halls' allegation of 
property interest violations is made explicitly through their 
claim 
of 
interference 
with 
their 
property 
interests 
and 
implicitly by reference to the restrictive covenant breach.  
However, AIG appears to argue that the only types of property 
rights violations covered by the PCG policy are eviction and 
wrongful entry claims.  We disagree.  Nothing in the text of the 
policy precludes injuries that include other violations of 
property interests from being covered as well.9 
¶40 Wisconsin is a notice pleading state.  See Wis. Stat. 
§ 802.02.  We have explained that under the notice pleading 
                                                 
9 While we do not definitely establish the contours of the 
full range of intrusions into property constituting covered 
injuries, we note that Wis. Stat. § 844.01(2), which defines 
physical injury to real property, explains that "[p]hysical 
injury includes unprivileged intrusions and encroachments; the 
injury may be surface, subsurface or suprasurface; the injury 
may arise from activities on the plaintiff's property, or from 
activities 
outside 
the 
plaintiff's 
property 
which 
affect 
plaintiff's property."  Although Liebovich's neighbors did not 
bring a claim under this statute, the statutory language helps 
illustrate that their complaint alleges a physical injury to 
real property, along with other general injuries. 
No. 
2006AP405   
 
22 
 
requirements set forth by § 802.02(1)(a) and (6), "a complaint 
must simply contain '[a] short and plain statement of the claim, 
identifying 
the 
transaction 
or 
occurrence 
or 
series 
of 
transactions or occurrences out of which the claim arises and 
showing that the pleader is entitled to relief[,]'" and that 
such claims must be "liberally 'construed [so] as to do 
substantial justice.'"  Doe v. Archdiocese of Milwaukee, 2005 WI 
123, ¶35, 284 Wis. 2d 307, 700 N.W.2d 180 (citations omitted).  
Because the exact form of injury suffered need not be spelled 
out in a complaint under the rules of notice pleading, the 
Halls' allegations that Liebovich "interfered with [their] 
interest" and that they were "aggrieved by" his actions are 
sufficient to allege injury for the purpose of triggering a duty 
to defend.   
   
¶41 Having determined that the Halls' complaint alleges an 
injury covered by Liebovich's PCG policy, we also conclude that 
the complaint alleges an occurrence, as required for insurance 
coverage.  AIG argues that there is no occurrence alleged 
because there is no allegation of personal injury.  This 
argument is merely a repackaging of AIG's contention that the 
Halls' complaint does not allege an injury.  We have already 
discarded the argument that the Halls' complaint does not allege 
an injury.  AIG fails to explain why, once we conclude that the 
Halls' complaint alleges an injury caused by Liebovich's 
covenant violation, there is no occurrence alleged within the 
meaning of Liebovich's PCG policy.  
No. 
2006AP405   
 
23 
 
 
B 
¶42 We next address AIG's claim that "the Halls' complaint 
sought general equitable relief, not monetary damages."  While 
conceding that the complaint's ad damnum clause does contain a 
request for damages, AIG appears to argue that because the 
complaint also requests equitable relief, the damages sought 
were not "damages" as defined by AIG's policy, which defines 
"damages" as "the sum required to satisfy a claim, whether 
settled or agreed to in writing by us or resolved by judicial 
procedure."   
¶43 Liebovich describes as incredible AIG's assertion that 
a 
complaint 
which 
explicitly 
states 
"Plaintiffs 
request . . . damages" does not seek damages.  Repeating the 
rhetorical question posed by the court of appeals, Liebovich 
asks, "for where but the ad damnum clause would a court look to 
see whether damages were requested?"  Liebovich argues that the 
court of appeals properly observed that an insurer may not rely 
solely on the "equitable relief" and "damages" labels attached 
to a complaint to decide whether coverage exists.  Liebovich, 
299 Wis. 2d 331, ¶9 (citing Johnson Controls, Inc. v. Employers 
Ins. of Wausau, 2003 WI 108, ¶44, 264 Wis. 2d 60, 665 N.W.2d 
257, cert. denied, 541 U.S. 1027 (2004)).  
¶44 We agree.  AIG's argument that damages are not claimed 
in the Halls' complaint fails, due to the clear request for 
damages in the complaint's ad damnum clause that corresponds 
with injuries claimed elsewhere in the Halls' complaint.  AIG 
No. 
2006AP405   
 
24 
 
cites Midway Motor Lodge of Brookfield v. Hartford Insurance 
Group, 226 Wis. 2d 23, 35-36, 593 N.W.2d 852 (Ct. App. 1999), 
for the proposition that merely mentioning "damages" in the ad 
damnum clause is not enough to find that the complaint states a 
claim for damages.  However, Midway Motor Lodge simply stands 
for the proposition that in order to constitute a cause of 
action, the pleading must allege "an actual loss or damage as a 
result of the injury."  Id. at 35.  In that case, Midway Motor 
Lodge failed to plead what loss or damage it suffered as a 
result of the breach of duty that had occurred.  Id.   
¶45 Midway Motor Lodge has been clarified by Baumann, 286 
Wis. 2d 667, ¶¶15-18.  In Baumann, the court of appeals 
explained that the reason the court in Midway Motor Lodge found 
the allegation of damages in the ad damnum clause in that case 
insufficient was because the basis for recovery, loss of use of 
tangible property, had not been pled with specificity and, 
therefore, "the rest of the complaint contained no allegations 
that would support the conclusion that the plaintiff had 
suffered incidental and consequential damages."  Baumann, 286 
Wis. 2d 667, ¶17.  The Baumann court further explained that 
while "the prayer for relief does not cure an otherwise 
insufficient pleading, it is nonetheless a relevant portion of 
the pleading that 'can be of value to clarify and support the 
pleading's 
allegations.'" 
 
Id., 
¶18 
(citation 
omitted).  
Consequently, the court held that "we may rely on the ad damnum 
clause to clarify the allegations set forth in the remainder of 
the complaint."  Id. 
No. 
2006AP405   
 
25 
 
¶46 We concur with the Baumann court's description of 
Midway Motor Lodge.  The latter case involved a claim for an 
improperly installed sewer system, and the court concluded that 
no facts were alleged supporting a claim for injury in the form 
of property damage.  Midway Motor Lodge, 226 Wis. 2d at 32-36.  
The complaint alleged only that there was a problem with the 
system, not how that problem affected the plaintiffs.  Id. at 
34-35.  The complaint described an injury to the sewer system 
from negligent construction rather than an injury to the 
plaintiffs themselves, alleging that "[t]he negligent actions 
and omissions of Hunzinger were a proximate cause of the failure 
of the underground sewer system."  Id. at 28. 
¶47 Here, in contrast with the plaintiffs in Midway Motor 
Lodge, the Halls did allege injuries in their complaint, as we 
have explained.  The complaint specifically alleges that the 
Halls were aggrieved by Liebovich's violation of the setback 
restriction, and that the violation interfered with the Halls' 
interests in and to their neighboring real property.  Because we 
have concluded that the Halls' complaint sufficiently alleges 
injuries, indicates that they suffered actual damage or loss, 
and specifically requests a damage award to compensate them for 
such injuries and loss, we reject AIG's argument that the 
complaint does not allege damages for purposes of insurance 
coverage. 
C 
¶48 Finally, AIG invokes the intentional acts exclusion of 
Liebovich's PCG policy, which provides: 
No. 
2006AP405   
 
26 
 
E. 
Exclusions 
This 
policy 
does 
not 
provide 
coverage 
for 
liability, defense costs or any other cost or 
expense for: 
. . . . 
19. Personal Injury or Property Damage resulting 
from any criminal, willful or malicious act 
or omission by any person.  We also will not 
cover claims for acts or omissions of any 
person which are intended to result in, or 
would be expected by a reasonable person to 
cause, property damage or personal injury.  
This exclusion applies even if the injury or 
damage is of a different kind or degree, or 
is sustained by a different person, than 
expected or intended.  This exclusion does 
not apply to bodily injury if the insured 
person 
acted 
with 
reasonable 
force 
to 
protect any person. 
AIG argues that this exclusion precludes coverage in this case 
because the Halls' complaint alleges actual and constructive 
knowledge of the setback covenant, as well as conduct which was 
intentional and in willful disregard of his neighbors' rights.  
¶49 AIG maintains that "Liebovich's construction of his 
home was a consequence that he certainly intended.  As a result, 
any claims resulting from this intentional act are precluded."  
While 
conceding 
that 
Wisconsin 
courts 
have 
interpreted 
intentional act exclusions as requiring intent to injure, not 
just intent to act, AIG points out that intent to injure may be 
inferred "if the degree of certainty that the conduct will cause 
injury is sufficiently great to justify inferring intent to 
injure as a matter of law," quoting Loveridge v. Chartier, 161 
Wis. 2d 150, 169, 468 N.W.2d 146 (1991).  Such is the case here, 
No. 
2006AP405   
 
27 
 
AIG argues, because any harm in this case was guaranteed by 
Liebovich's decision to build his home in violation of the 125-
foot setback covenant.   
¶50 We disagree, and conclude that the intentional acts 
exclusion is inapplicable to this case for several reasons.   
¶51 First, we observe that the PCG policy's general 
coverage of intentional offenses as well as accidents arguably 
renders its "intentional acts" exclusion ambiguous.10  While 
neither the text of the main coverage clause of Liebovich's PCG 
policy nor the intentional acts exclusion, viewed in isolation, 
is ambiguous, reading them in conjunction with one another 
reveals some ambiguity arising from the apparent contradiction 
between the main coverage clause's coverage of non-accidental 
(i.e., intentional) offenses, and the policy's exclusion of 
intentional acts.   
Ambiguity 
in 
an 
insurance 
policy 
may 
arise 
in 
different ways.  First, the language of the disputed 
provision may be ambiguous because the import of the 
words is uncertain or the impact of the words is 
uncertain with respect to unusual facts.  Second, a 
provision that is unambiguous when viewed in isolation 
may become ambiguous when considered in the context of 
the entire policy. 
                                                 
10 On this point, Liebovich points out that AIG's argument 
to the contrary conflicts with an argument made by AIG itself in 
a previous case, Kitsap County v. Allstate Insurance Co., 964 
P.2d 1173 (Wash. 1998).  In that case, Liebovich observes, AIG 
and other insurers argued that "because the term 'offenses' is 
used in the personal coverage provisions, it is axiomatic 
that . . . intentional acts are covered."  Id. at 1181.  
No. 
2006AP405   
 
28 
 
Teschendorf v. State Farm Ins. Cos., 2006 WI 89, ¶74, 293 Wis. 
2d 123, 717 N.W.2d 258 (Prosser, J., concurring)(citing Folkman 
v. Quamme, 2003 WI 116, ¶13, 264 Wis. 2d 617, 665 N.W.2d 857).  
This case falls into the latter category.  
¶52 However, we have resolved the ambiguous meaning of 
intentional acts exclusions in previous cases, in which we have 
explained that intentional act exclusions preclude coverage 
where some alleged harm or injury, in addition to the act 
causing injury, was intended by or should have been anticipated 
by the insured.  See Loveridge, 161 Wis. 2d at 168-69; Raby v. 
Moe, 153 Wis. 2d 101, 110-11, 450 N.W.2d 452 (1990).  In Raby, 
this court explained that in order for such an intentional acts 
exclusion to preclude coverage, "[f]irst, the insured must 
intentionally act, and, second, the insured must intend some 
injury or harm to follow from that act."  Raby, 153 Wis. 2d at 
110 (citing Pachucki v. Republic Ins. Co., 89 Wis. 2d 703, 710, 
278 N.W.2d 898 (1979)).  Therefore, in interpreting and applying 
an intentional acts exclusion clause, once we "hav[e] concluded 
that [an insured's] intent to act is established . . . we turn 
to the question of whether [the insured] intended some injury or 
harm to follow from his intentional act."  Raby, 153 Wis. 2d at 
110-11.  
¶53 In 
addition, 
interpreting 
the 
intentional 
acts 
exclusion as requiring an allegation of intent to injure, not 
just to act, is the interpretation offered by Liebovich.  Due to 
the ambiguous nature of the distinction in his policy between 
non-accidental offenses (which are covered) and "intentional 
No. 
2006AP405   
 
29 
 
acts" (which aren't), we defer to Liebovich's reasonable 
interpretation.  See Elliott, 169 Wis. 2d at 321 ("If there is 
any doubt about the duty to defend, it must be resolved in favor 
of the insured.").  
¶54 Furthermore, we agree with Liebovich that intent to 
build a house in a manner that violates a covenant is not the 
same as intent to harm.  Intent to harm was not alleged by the 
Halls' complaint.  The allegation that Liebovich's violation of 
the covenant was intentional and in willful disregard of his 
neighbors' 
rights 
does 
not 
equate 
to 
an 
allegation 
of 
intentional harm.  Rather, the "intentional violation" language 
can reasonably be interpreted as describing a volitional 
construction that violated the covenant, but not intent to harm 
anyone in the process.  Consequently, because there is no 
allegation that Liebovich intended not just to build a house, 
but also for some harm or injury to result, the intentional act 
exclusion does not apply.   
¶55 As a final note, we emphasize the preferred process 
for insureds to resolve duty–to-defend disputes.  As we have 
explained, it is well established that an insurer may request a 
bifurcated trial on the issue of coverage while moving to stay 
proceedings on the merits of the liability action until the 
issue of coverage is resolved.  Newhouse, 176 Wis. 2d at 836 
(citing Elliott, 169 Wis. 2d at 318).  "When this procedure is 
followed," we explained, "the insurance company runs no risk of 
breaching its duty to defend."  Newhouse, 176 Wis. 2d at 836.  
In addition to the Elliott/Newhouse procedure, insurers may 
No. 
2006AP405   
 
30 
 
raise the coverage issue in other ways, such as seeking a 
declaratory ruling or agreeing to provide a defense under a 
reservation of rights.  See Baumann, 286 Wis. 2d 667, ¶8.  While 
these procedures are not absolute requirements, we strongly 
encourage insurers wishing to contest liability coverage to 
avail themselves of one of these procedures rather than 
unilaterally refuse to defend.  A unilateral refusal to defend 
without first attempting to seek judicial support for that 
refusal can result in otherwise avoidable expenses and efforts 
to litigants and courts, deprive insureds of their contracted-
for protections, and estop insurers from being able to further 
challenge coverage. 
IV 
¶56 In sum, we conclude that AIG's unilateral decision to 
deny liability coverage to Liebovich, without first turning to 
the well-established procedures described in Elliott, Newhouse, 
and Baumann, and despite the allegations of an occurrence, 
injury and damages in the Halls' complaint, was a breach of 
AIG's duty to defend Liebovich.  We conclude the intentional 
acts exclusion in Liebovich's PCG policy did not justify AIG 
abandoning its policyholder because the Halls' complaint did not 
allege that Liebovich intended to harm them.  To the extent 
there is any ambiguity about the PCG policy's coverage of the 
claims against Liebovich, such ambiguities are resolved in favor 
of liability coverage.  Consequently, we hold that AIG had a 
duty to defend Liebovich and that it breached that duty.  We 
affirm the court of appeals' decision, adding to the court of 
No. 
2006AP405   
 
31 
 
appeals' remand directions that the circuit court should 
additionally address Liebovich's indemnification claim.   
By the Court.—The decision of the court of appeals is 
affirmed and modified, and, as modified, the cause is remanded 
to the circuit court. 
¶57 ANNETTE KINGSLAND ZIEGLER, J., did not participate. 
 
No. 
2006AP405   
 
 
 
1