Title: Paul J. Everson v. Richard J. Lorenz
Citation: 2005 WI 51
Docket Number: 2003AP001331
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: April 22, 2005

2005 WI 51 
 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2003AP1331 
COMPLETE TITLE: 
 
 
Paul J. Everson and Michelle J. Everson,  
          Plaintiffs, 
 
Pekin Insurance Company,  
          Intervening Plaintiff-Respondent, 
     v. 
Richard J. Lorenz and Lorenz Land Development, 
Inc.,  
          Defendants-Third- 
          Party Plaintiffs-Appellants, 
 
Sharon Jeanquart, individually, and d/b/a  
Jeanquart Realty and ACE American Insurance 
Company,  
          Third-Party Defendants. 
 
 
 
 
ON CERTIFICATION FROM THE COURT OF APPEALS 
 
 
OPINION FILED: 
April 22, 2005   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
January 14, 2005   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Calumet   
 
JUDGE: 
Donald A. Poppy   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
BUTLER, J., concurs (opinion filed).   
 
DISSENTED: 
BRADLEY, J., dissents (opinion filed). 
ABRAHAMSON, C.J., joins the dissent.   
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the defendants-third-party plaintiffs-appellants there 
was a brief by Mark S. Des Rochers and Lawrence & Des Rochers, 
S.C., St. Nazianz, and oral argument by Mark S. Des Rochers. 
 
For the intervening plaintiff-respondent there was a brief 
by Monte E. Weiss and Weiss Law Office, S.C., Milwaukee, and 
oral argument by Monte E. Weiss. 
 
An amicus curiae brief was filed by Troy D. Thompson, 
Jonathan M. Ward and Axley Brynelson, LLP, Madison, on behalf of 
 
 
2
Civil Trial Counsel of Wisconsin and Wisconsin Insurance 
Alliance. 
 
 
2005 WI 51 
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2003AP1331  
(L.C. No. 
02 CV 100) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Paul J. Everson and Michelle J. Everson,  
 
          Plaintiffs, 
 
Pekin Insurance Company,  
 
          Intervening Plaintiff- 
          Respondent, 
 
     v. 
 
Richard J. Lorenz and Lorenz Land  
Development, Inc.,  
 
          Defendants-Third- 
          Party Plaintiffs-Appellants, 
 
Sharon Jeanquart, individually, and d/b/a  
Jeanquart Realty and ACE American  
Insurance Company,  
 
          Third-Party Defendants. 
 
FILED 
 
APR 22, 2005 
 
Cornelia G. Clark 
Clerk of Supreme Court 
 
 
 
 
 
APPEAL from an order of the Circuit Court for Calumet 
County, Donald A. Poppy, Judge.  Affirmed.   
 
¶1 
N. PATRICK CROOKS, J.   This case comes before us on 
certification 
from 
the 
court 
of 
appeals 
pursuant 
to 
No. 
2003AP1331  
 
2 
 
Wis. Stat. § (Rule) 809.61 (2001-02).1  Richard Lorenz and Lorenz 
Land Development, Inc. (Lorenz) seek review of an order of the 
Circuit Court for Calumet County, Donald A. Poppy, Judge, 
granting Intervenor Pekin Insurance Company's (Pekin) motion for 
summary judgment.  This case presents the issue of whether 
Pekin's insurance policy provides coverage to its insured, 
Lorenz, 
for 
strict 
responsibility 
misrepresentation 
and/or 
negligent misrepresentation claims filed against it by Paul and 
Michelle Everson (Everson).   
¶2 
The court of appeals certified three questions to this 
court: 
(1) 
Does 
an 
alleged 
strict 
responsibility 
misrepresentation and/or negligent misrepresentation in a real 
estate transaction constitute an "occurrence" for the purpose of 
a commercial general liability insurance policy such that the 
insurer's duty to defend the insured is triggered?; (2) What 
allegations must a complaint contain to plead sufficiently "loss 
of use" within the meaning of a commercial general liability 
insurance policy?; and (3) Under what circumstances does a 
misrepresentation, negligent or strict responsibility, cause the 
"loss of use" of property such that a "causation nexus" is 
established?   
                                                 
1 Unless otherwise indicated all references to Wisconsin 
Statutes are to the 2001-02 edition.   
Wisconsin Stat. § (Rule) 809.61 states, in relevant part: 
"The supreme court may take jurisdiction of an appeal or other 
proceeding in the court of appeals upon certification by the 
court of appeals or upon the supreme court's own motion." 
No. 
2003AP1331  
 
3 
 
¶3 
We conclude that since there is no coverage based on 
Everson's complaint and the language of the Pekin insurance 
policy, Pekin has no duty to defend and no duty to indemnify 
Lorenz against Everson's claims for strict responsibility and/or 
negligent misrepresentation.  The alleged misrepresentation was 
not an "occurrence" within the meaning of the policy.  We hold 
that Everson must plead more than "damages" in relation to the 
misrepresentation claims to plead sufficiently a "loss of use" 
under the policy.  We further conclude that since the complaint 
fails to allege "property damage," in that there is no 
allegation of an "occurrence," and no allegation of "loss of 
use," there clearly is not a sufficient allegation of "causation 
nexus."  The "property damage" was caused by defects in the 
property, not by any misrepresentations of Lorenz.   
I. FACTS 
¶4 
For the purposes of this review, the facts of this 
case are undisputed.  Lorenz, a real estate developer, purchased 
vacant land in Brillion, Wisconsin in 1997.  This property 
eventually became the subdivision known as Deer Run Estates.  
Everson bought a parcel in the subdivision from Lorenz, Lot 31, 
for the purpose of constructing a single family home.  Everson 
accepted the offer on June 29, 2000.   
¶5 
After 
the 
transaction 
was 
completed, 
Everson 
determined that a portion of Lot 31 was located within a 100-
year flood plain.  As a result, Everson filed a complaint 
No. 
2003AP1331  
 
4 
 
against Lorenz on March 18, 2002.2  The claims  alleged in the 
complaint were as follows: (1) negligent misrepresentation; (2) 
strict 
responsibility 
misrepresentation; 
(3) 
intentional 
misrepresentation; and (4) breach of contract.  Specifically, 
Everson alleged that Lorenz represented that no portion of the 
property (Lot 31) lay within a 100-year flood plain.3  As a 
result, the construction of the home would not be possible in 
the location that Everson wished to build.  Everson's complaint 
alleged that the property was "unbuildable," and asked for 
damages in the amount of $37,000.4     
¶6 
At the time of the purchase, Pekin insured Lorenz 
under a commercial general liability policy.  Following the 
initiation of suit by Everson, Lorenz tendered its defense to 
Pekin.  Pekin has since moved to intervene, bifurcate the 
                                                 
2 The original complaint was filed on March 18, 2002, in 
Outagamie County Circuit Court.  However, the parties stipulated 
that because the plaintiffs and defendants reside in Calumet 
County, and the land in question is in Calumet County, that it 
would be appropriate for the venue to be changed.  The Outagamie 
County Circuit Court, John A. Des Jardins, Judge, ordered that 
the case be transferred to Calumet County on May 13, 2002.   
3 Everson attached to the complaint a Real Estate Condition 
Report that was completed by Lorenz prior to the purchase.  In 
the report, Lorenz affirmatively states that "[s]ome lots as 
shown on Exhibit A attached have as part of their back lots land 
that lies within the approximate 100 year flood plain.  On lots 
14-22 this area falls in the wooded ravine area and for lots 23-
27, 21 & 32 it falls within the grassland area on the back of 
the lots." (Emphasis added.)   
4 The damages that Everson claimed were, for the most part, 
damages incurred during the preparation for construction, such 
as building plans, permits, foundation, windows, etc.   
No. 
2003AP1331  
 
5 
 
insurance coverage issues from the liability and damage issues, 
and stay all liability and damage issues until the insurance 
coverage issues have been decided.  The circuit court granted 
this motion, and Pekin subsequently hired counsel to represent 
Lorenz on the merits of the pending action against Everson.     
¶7 
On February 11, 2003, Pekin filed a motion for summary 
judgment on the issues of insurance coverage, including the duty 
to defend and indemnify.  The circuit court, the Honorable 
Donald A. Poppy presiding, granted Pekin's summary judgment 
motion in a written order as follows: (1) No coverage exists 
under Pekin's policy of insurance, for the complaint and causes 
of action of Everson in the present matter; (2) no duty exists 
on behalf of Pekin to defend Lorenz for the complaint filed by 
Everson in the present matter; (3) no duty exists on behalf of 
Pekin to indemnify Lorenz for the complaint filed by Everson in 
this matter; and (4) the stay of discovery memorialized in the 
court's order dated August 8, 2002 is hereby dissolved.     
¶8 
Lorenz appealed the circuit court's grant of summary 
judgment.  The court of appeals certified the case to this 
court.  We accepted certification and now affirm the order of 
the circuit court.     
II. STANDARD OF REVIEW 
¶9 
We review a circuit court's grant of summary judgment 
de novo, applying the same methodology as the circuit court, and 
benefiting from its analysis.  Atkins v. Swimwest Family Fitness 
Center, 2005 WI 4, ¶11, ___ Wis. 2d ___, 691 N.W.2d 334.  
According to Wis. Stat. § 802.08(2), summary judgment will be 
No. 
2003AP1331  
 
6 
 
granted 
"if 
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 a 
judgment as a matter of law."    
¶10 We also address issues regarding the interpretation of 
an insurance contract.  Such interpretation, we have held, 
presents a question of law which we review de novo.  Lambert v. 
Wrensch, 135 Wis. 2d 105, 115, 399 N.W.2d 369 (1987).     
III. ANALYSIS 
¶11 The determinative issue presented in this case is 
whether Pekin's insurance policy provides coverage to Lorenz for 
the strict responsibility and/or negligent misrepresentation 
claims filed by Everson.  We have held that an insurer's duty to 
defend its insured is triggered by comparing the allegations of 
the complaint to the terms of the insurance policy.  See Smith 
v. Katz, 226 Wis. 2d 798, 806, 595 N.W.2d 345 (1999).  "'These 
allegations must state or claim a cause of action for the 
liability insured against or for which indemnity is paid in 
order for the suit to come within any defense coverage of the 
policy. . . . '"  Qualman v. Bruckmoser, 163 Wis. 2d 361, 364, 
471 N.W.2d 282 (Ct. App. 1991) (quoting Grieb v. Citizens 
Casualty Co., 33 Wis. 2d 552, 557, 148 N.W.2d 103 (1967).   
¶12 Since Pekin's duty to defend is determined by the 
language in both the policy provisions and the complaint, we set 
forth the relevant portions of each.  The insurance policy 
states in part:     
No. 
2003AP1331  
 
7 
 
SECTION 1- COVERAGES 
 
COVERAGE 
A. 
BODILY 
INJURY 
AND 
PROPERTY 
DAMAGE 
LIABILITY 
 
1.  Insuring Agreement. 
 
a. 
  We will pay those sums that the insured 
becomes legally obligated to pay as damages 
because 
of 
 "bodily 
injury" 
or "property 
damage" to which this insurance applies.  We 
will have the right and duty to defend any 
"suit" seeking those damages.  We may at our 
discretion investigate any "occurrence" and 
settle any claim or suit that may result.  
. . .  
 
b.   This insurance applies to  . . . "property 
damage" only if: 
 
(1) The . . . "property damage" is caused 
by an "occurrence" that takes place in 
the "coverage territory;" and 
 
(2) The 
. . . "property 
damage" 
occurs 
during the policy period.   
 
 . . . . 
 
SECTION V – DEFINITIONS 
 
 
 . . . . 
 
12. 
"Occurrence" 
means 
an 
accident, 
including 
continuous or repeated exposure to substantially the 
same general harmful conditions.  
 
 
 
 . . . . 
 
 
15. "Property damage" means:  
 
 
a. 
Physical 
injury 
to 
tangible 
property, 
including all resulting loss of use of that 
property.  All such loss of use shall be 
deemed to occur at the time of the physical 
injury that caused it; or  
No. 
2003AP1331  
 
8 
 
 
b. 
Loss of use of tangible property that is not 
physically injured.   . . .   
(Emphasis added.)   
 
¶13 As previously stated, the four claims that Everson 
alleges 
against 
Lorenz 
are 
strict 
responsibility 
misrepresentation, 
negligent 
misrepresentation, 
intentional 
misrepresentation, and breach of contract.5  The relevant 
allegation of the complaint is as follows:  
7. Subsequently, the Plaintiffs discovered that a 
substantial portion of Lot 31 lay within the 100 year 
flood plain making the construction of the home which 
they wished to construct on the property impossible in 
the location in which the Plaintiffs wished to build 
based upon the pre-sale representations of LORENZ, 
rendering the property unbuildable for the Plaintiffs 
and causing the Plaintiffs to incur damages as a 
result in excess of $37,000.00.  
¶14 In looking at the four corners of the complaint and 
the insurance policy, we recognize that "[o]ur objective is to 
further the insured's reasonable expectations of coverage while 
meeting the intent of both parties to the contract."  Benjamin 
v. Dohm, 189 Wis. 2d 352, 359, 525 N.W.2d 371 (Ct. App. 1994) 
(citation omitted).  Accordingly, we must not rewrite the 
insurance policy to bind an insurer to a risk which the insurer 
did not contemplate and for which it has not been paid.  Id. at 
365.             
                                                 
5 The relevant claims for this coverage inquiry are strict 
responsibility 
misrepresentation 
and 
negligent 
misrepresentation.  The claims for intentional misrepresentation 
and breach of contract are excluded from coverage under the 
terms of Pekin's insurance policy.    
No. 
2003AP1331  
 
9 
 
A. "OCCURRENCE" 
¶15 Pekin's insurance policy would cover liability for 
"property damage" if it resulted from an "occurrence."  In the 
policy, "occurrence" is defined as "an accident, including 
continuous or repeated exposure to substantially the same 
general harmful conditions."  Although the term "accident" was 
not defined by the policy, this court has often relied on 
dictionary definitions for assistance.  See Am. Fam. Mut. Ins. 
Co. v. American Girl, Inc., 2004 WI 2, ¶37, 268 Wis. 2d 16, 673 
N.W.2d 65; 
Doyle 
v. 
Engelke, 
219 
Wis. 2d 277, 
289, 
580 
N.W.2d 245 (1998).  Black's Law Dictionary defines "accident" as 
"[a]n unintended and unforeseen injurious occurrence; something 
that does not occur in the usual course of events or that could 
not be reasonably anticipated."  Black's Law Dictionary 15 (7th 
ed. 1999).  Additionally, we have defined accident to mean 
"'[a]n unexpected, 
undesirable event'" 
or 
"'an 
unforeseen 
incident'" which is characterized by a "'lack of intention.'" 
Doyle, 219 Wis. 2d at 289 (quoting The American Heritage 
Dictionary of the English Language 11 (3d ed. 1992)).     
¶16 Lorenz, in relying on these definitions, argues that 
the misrepresentation was an "accident."  It contends that a 
reasonable insured would expect that the Pekin policy definition 
of "occurrence" as an "accident" would cover the typographical 
error relied upon by Everson in the pre-sale representation.  In 
support of this claim, Lorenz cites a Maryland Court of Appeals 
case, Sheets v. Brethren Mutual Insurance Co., 679 A.2d 540 (Md. 
1996), where the court held that negligent misrepresentation can 
No. 
2003AP1331  
 
10 
 
be considered an "accident."  In Sheets, the insureds sold their 
farmhouse.  After the transaction, the buyers claimed that the 
insureds intentionally and negligently misrepresented that the 
septic 
system 
at 
their 
farmhouse 
was 
in 
"good 
working 
condition."  Id. at 541.  The buyers alleged that the septic 
system began leaking and flooding, which required it to be 
replaced. 
 
The 
court 
acknowledged 
that 
"negligent 
misrepresentation is a form of negligence," and that "an act of 
negligence constitutes an 'accident' under a liability insurance 
policy when the resulting damage was 'an event that takes place 
without [the insured's] foresight or expectation.'"6  Id. at 548 
(quoting Harlyesville v. Harris & Brooks, 235 A.2d 556, 559 (Md. 
1967)).  
¶17 Lorenz insists that our negligence analysis in Doyle, 
a case involving allegations of negligent supervision of 
employees, is "strikingly similar" to the analysis in Sheets.  
See Smith, 226 Wis. 2d at 822.  In Doyle, we held that an 
                                                 
6 The court in Sheets v. Brethren Mutual Insurance Co., 679 
A.2d 540, 551 (Md. 1996), recognized that jurisdictions 
split 
on 
whether 
a 
negligent 
misrepresentation 
can 
constitute an "occurrence."  The court stated:  
We prefer to follow those cases that treat negligent 
misrepresentation like other forms of negligence, 
which are covered as accidents if the insured did not 
expect or foresee the resulting damage.  In accordance 
with our own precedent outlined above, the ultimate 
inquiry is whether the resulting damage is "an event 
that 
takes 
place 
without 
one's 
foresight 
or 
expectation."   
Id. (citation omitted).  
No. 
2003AP1331  
 
11 
 
insurance policy using the term "event" covered negligent acts.  
The policy defined "event" the same as this policy defines 
"occurrence," as "'an accident, including continuous or repeated 
exposure to substantially the same general harmful conditions.'"  
Doyle, 219 Wis. 2d at 289.  The court then held that both the 
definition for "negligence" and "accident" "center on an 
unintentional occurrence leading to undesirable results."  Id. 
at 290.  As a result, the court found that a reasonable person 
would expect the policy provision using the term "event" to 
cover negligent acts.  Id. at 289-90.  Lorenz asks this court to 
extend 
that 
holding 
to 
acts 
involving 
negligent 
misrepresentation.          
¶18 This court has never specifically held that strict 
responsibility and/or negligent misrepresentation are similar to 
other kinds of negligence 
so as 
to 
categorize them as 
"accidents."  See Smith, 226 Wis. 2d at 822.  We specifically 
left the question open in Smith, to determine if "these torts 
are sufficiently different from other kinds of negligence to 
preclude their categorization as 'accidents'" in insurance 
liability policies.  Id.   We now conclude that Lorenz's 
misrepresentation cannot be considered an "accident" for the 
purpose of Pekin's liability insurance coverage.   
¶19 Lorenz's misrepresentation can be defined as an "act 
of 
making 
a 
false 
or 
misleading 
statement 
about 
something. . . ."  Black's Law Dictionary 1016 (7th ed. 1999).  
To be liable, Lorenz must have asserted a false statement, and 
such an assertion requires a degree of volition inconsistent 
No. 
2003AP1331  
 
12 
 
with the term accident.  See Sheets, 679 A.2d at 552-53 
(Karwacki, J., dissenting).  Although this assertion may be 
prompted by negligence, it is nevertheless devoid of any 
suggestion of accident.  See C.Y. Thomason Co. v. Lumbermens 
Mut. Cas. Co., 183 F.2d 729 (4th Cir. 1950).  More specifically: 
"Injury that is caused by negligence must be distinguished from 
injury that is caused by a deliberate and contemplated act 
initiated at least in part by the actor's negligence at some 
earlier point."  GATX Leasing Corp. v. Nat'l Union Fire Ins. 
Co., 64 F.3d 1112, 1118 (7th Cir. 1995).   
¶20 This 
interpretation 
is 
distinguishable 
from 
our 
previous discussion of the terms "event," "negligence," and 
"accident" which, in Doyle, centered on an unintentional, rather 
than 
volitional, 
act. 
 
See 
Doyle, 
219 
Wis. 2d at 
289.  
Accordingly, in this case, we do not determine that injury or 
damage prompted from a negligent misrepresentation is ipso facto 
caused by "accident," within the meaning of commercial general 
liability policies.  See J.P. Ludington, Annotation, Liability 
Insurance: Accident or "Accidental" as Including Loss Resulting 
from Ordinary Negligence of Insured or His Agent, 7 A.L.R. 3d 
1262, § 4 (1966).  We conclude instead that where there is a 
volitional act involved in such a misrepresentation, that act 
removes it from coverage as an "occurrence" under the liability 
insurance policy.  
¶21 This holding is similar to a case decided by the 
Seventh Circuit, Red Ball Leasing, Inc. v. Hartford Accident & 
Indemnity Co., 915 F.2d 306 (7th Cir. 1990).  There, the insured 
No. 
2003AP1331  
 
13 
 
financed the sale of four trucks to a lessee.  The insured later 
repossessed the trucks based on the mistaken belief that the 
lessee had defaulted on his payments.  The insured was sued and 
claimed that it should be defended and reimbursed under the 
terms of its insurance policy.  The insurance company refused to 
defend, arguing that the conversion was not an "accident" 
triggering such a duty.  The court held that coverage was not 
required for the conversion because it was an intentional act, 
and intentional acts are not "accidents" under the terms of the 
policy.  See Mindis Metals, Inc. v. Transp. Ins. Co., 209 F.3d 
1296 (11th Cir. 2000).  Specifically, the court held:  
A volitional act does not become an accident simply 
because the insured prompted the act.  Injury that is 
caused directly by negligence must be distinguished 
from injury that is caused by a deliberate and 
contemplated act initiated at least in part by the 
actor's negligence at some earlier point.  The former 
injury may be an accident.  . . . However, the latter 
injury, because it is intended and the negligence is 
attenuated 
from 
the 
volitional 
act, 
is 
not 
an 
accident. 
Red Ball Leasing, 915 F.2d at 31l (citations and footnote 
omitted).  Since this determination in Red Ball, several courts 
have cited this holding positively.  See Mindis Metals, Inc., 
209 F.3d at 1301 (Plaintiff intended to damage railcars and use 
them for scrap metal.  This action may have been prompted by a 
mistake as to ownership, but there was nothing "accidental" 
about it.); City of Jasper v. Employers Ins. of Wausau, 987 F.2d 
453 (7th Cir. 1993) (finding that an insurance company had no 
duty to defend the City of Jasper against a suit alleging that 
No. 
2003AP1331  
 
14 
 
the City negligently issued two permits, because issuing the 
permits was an intentional act and thus not an "accident"); 
Massachusetts Bay Ins. Co. v. Vic Koenig Leasing, Inc., 136 F.3d 
1116, 
1125 
(7th 
Cir. 
1998) 
("(Defendant's) 
(wrongful) 
repossession of the automobile, like that in Red Ball, certainly 
was an intentional and affirmative act . . . it cannot be 
construed an 'accident' under the terms of the policy"); 
Allstate Ins. Co v. Norris, 795 F. Supp. 272 (S.D. Ind. 1992) 
(no "accident" where the insured fired several shots in an 
attempt to "pin down" an unidentified man, but instead struck a 
passerby). 
 
¶22 Likewise, Lorenz may have made a mistake of fact 
and/or error in judgment, but it later acted with volition.  It 
is clear that Lorenz intended to give Everson information as to 
whether the property was within the 100-year flood plain.  See 
Red Ball, 915 F.2d at 311.  What happened here, stripped to its 
essentials, is that an "action," not an "accident," of Lorenz 
gave Everson the misleading information.  See City of Jasper, 
987 F.2d at 457.  Even if there was a mistake made in filling 
out the Real Estate Condition Report, and that mistake induced 
reliance, the decision to give Everson the report is not an 
"accident" within the meaning of the policy.  See Red Ball, 915 
F.2d at 311. 
B. "LOSS OF USE" 
 
¶23 The next question we address is whether Everson's 
complaint contains allegations of "property damage."   As 
stated, the terms of Pekin's policy define "property damage" as 
No. 
2003AP1331  
 
15 
 
"[p]hysical injury to tangible property, including . . . loss of 
use of that property."  Both parties agree that there were no 
acts or omissions that resulted in physical injury to the 
property involved here.  Accordingly, our analysis is confined 
to whether Everson's complaint alleges a "loss of use."   
 
¶24 Lorenz asserts that Everson's complaint sufficiently 
pleads a claim for "property damage."  Lorenz argues that 
because Everson's complaint mentions damages that resulted from 
the misrepresentation, the claim falls within Pekin's insurance 
policy.  For support of this claim, Lorenz relies on the court 
of appeals' decision in Western Casualty & Surety Co. v. Budrus, 
112 Wis. 2d 348, 332 N.W.2d 837 (Ct. App. 1983).  There, a 
farmer purchased seed from Budrus, a feed mill operator insured 
by Western.  Budrus mistakenly gave the farmer the wrong seed, 
which was subsequently planted.  The farmer sued for negligence, 
and Budrus counterclaimed against Western demanding Western 
defend him on the claim.  The court held that because pleadings 
are to be liberally construed, the farmer's claim, although not 
artfully worded, included a claim for loss of use, and therefore 
created a duty for Western to defend.  See id. at 352.  Lorenz 
argues that this court, like the court in Budrus, should 
interpret Everson's complaint liberally, and find that the 
damages claimed plead sufficiently "loss of use."   
 
¶25 While we agree with Lorenz that we are to construe 
pleadings liberally, we disagree that Everson has sufficiently 
pleaded "loss of use" and thus "property damage."  The relief 
that Everson demands in his complaint falls within the court of 
No. 
2003AP1331  
 
16 
 
appeals' holding in Qualman and this court's holding in Smith.  
In Qualman, a homeowner was sued by the buyer of his property 
for 
breach 
of 
contract 
and 
misrepresentation 
concerning 
structural defects.  In the complaint, the plaintiff pled each 
misrepresentation count with the allegation of having sustained 
"damages."  The court held: "The damages for such claims, if 
proven, would be the difference between the market value of the 
property at the time of purchase and the amount actually paid.  
Therefore, the damages alleged by the Qualmans are pecuniary in 
nature and do not constitute property damage as defined by the 
insurance policy."  Qualman, 163 Wis. 2d at 366 (citation 
omitted).  Accordingly, the court held that when analyzing the 
insurance policy against the allegations in the complaint, 
"[p]roperty damage within the meaning of the policy was not 
alleged."  Id.      
¶26 More recently, in Smith, the insured had sold a vacant 
lot to the plaintiffs.  During construction of a house, the 
plaintiffs uncovered the existence of underground springs.  
These springs allegedly caused the foundation to collapse on 
multiple occasions.  When the plaintiffs filed suit, the 
complaint never alleged property damage.  Instead, the complaint 
merely stated that the "'plaintiffs have sustained damages.'"  
Smith, 226 Wis. 2d at 812.  As a result, the court decided that 
the complaint did not give the insurer fair notice that the 
claims, based 
on 
the 
alleged misrepresentations, involved 
"property damage."  Id. at 816.  The court concluded that "a 
complaint claiming strict responsibility misrepresentation or 
No. 
2003AP1331  
 
17 
 
negligent misrepresentation must contain some statement about 
physical injury to tangible property, some reference to loss of 
use, or some demand for relief beyond money damages if the 
complaint is to satisfy the requirement that 'property damage' 
be alleged within the four corners of the complaint."  Id. at 
817 (footnote omitted).         
 
¶27 Similarly, in Everson's complaint, there is no mention 
of "property damage."  As stated, the complaint simply alleges 
that the property was "unbuildable" for the plaintiffs and that 
they were forced to incur "damages" as a result.7  Like the 
complaints in Qualman and Smith, Everson's complaint only 
mentions "damages" as a result of the alleged misrepresentation.  
We give this language its plain meaning and conclude that 
Everson's complaint did not trigger insurance coverage for 
Lorenz and thus a duty for Pekin to defend Lorenz.  Without 
explicitly 
alleging 
that 
Lorenz's 
misrepresentation 
caused 
"property damage," Pekin was not on notice that this claim falls 
within the scope of the policy.  See Smith, 226 Wis. 2d at 817.  
Just as in Smith, however, a differently worded complaint, one 
that would provide fair notice that the misrepresentation claims 
caused a "loss of use," might have yielded a different result.  
Id. at 817-18.            
                                                 
7 We also decline to accept the argument that damages for 
"loss of use" were implicitly alleged in the complaint.  Such 
allegations would not put an insurance company on notice that 
Everson sustained "property damage."  We will not rewrite a 
complaint that does not clearly identify that coverage is 
warranted.     
No. 
2003AP1331  
 
18 
 
 
¶28 Our holding here is bolstered by the insufficiency of 
evidence to support a claim for "loss of use."  Therefore, even 
if we decided that "loss of use" was properly pled, it is clear 
from our review of the record that such a claim could not be 
supported.  Particularly, in Everson's deposition, he makes no 
allegation that his damages constituted a "loss of use":   
Q 
It was eventually determined that the foundation 
that was poured on your lot did not have to be 
moved or altered, that it was in compliance.  
Correct? 
A 
Correct. 
Q 
And you could have built the home you intended to 
build on that foundation.  Correct?  
A 
Correct. 
Q 
Why is it that you decided that it was no longer 
workable to build that home.  
A 
The lot that we purchased was not the lot that we 
ended up with.  It was represented inaccurately.  
And our plans for the backyard for landscaping, 
it would have affected what we wanted to do.  
Q 
What plans specifically would you not have been 
able to do. 
A 
We were going to do some landscaping along the 
back lot line that would have created a berm-type 
thing with some flowers, graded, slowly graded 
the back of the house away.   
At most, Everson has stated that the existence of the flood 
plain has caused him inconvenience.  By his explanation that the 
heart of the complaint is that the landscaping plans must be 
altered, it becomes quite clear that there is no claim of "loss 
of use."  
No. 
2003AP1331  
 
19 
 
 
¶29 In Wisconsin, a sufficient claim for "loss of use" 
requires that the property be rendered useless.  See Wisconsin 
Label Corp. v. Northbrook Prop. & Cas. Ins. Co., 2000 WI 26, 
¶50, 233 Wis. 2d 314, 607 N.W.2d 276; Sola Basic Indus., Inc. v. 
U.S. Fid. & Guar. Co., 90 Wis. 2d 641, 654, 280 N.W.2d 211 
(1979).  For support, we look to our decision in Sola Basic.  
There, the insured negligently repaired a transformer it had 
sold to the buyer, which resulted in its removal from the 
buyer's facility and required that it be completely rebuilt.  
This court held that damage to tangible property can constitute 
a "loss of use" if the property is made useless.8  Id.  
                                                 
8 In Sola Basic Industries, Inc. v. U.S. Fidelity & Guaranty 
Co., 90 Wis. 2d 641, 654, 280 N.W.2d 211 (1979), this court 
examined precedent from other jurisdictions and derived four 
basic principles pertaining to CGL policies.  For the purposes 
of our review, the fourth principle is most relevant.  It 
states: "'tangible property may be damaged in that it is 
diminished in value or made useless, irrespective of actual 
physical injury to the tangible property.'" See Wisconsin Label 
Corp. v. Northbrook Prop. & Cas. Ins. Co., 2000 WI 26, ¶44, 233 
Wis. 2d 314, 607 N.W.2d 276.   
Since these principles were developed in Sola Basic, we 
held in Wisconsin Label that use of the phrase "diminution in 
value" must be read in its proper context.  Specifically, we 
held:    
Sola Basic was interpreting the 1966 definition of 
"property damage," which omitted any requirement that 
an injury be "physical" in order to trigger coverage.  
As 
Hauenstein 
held, 
the 
broad 
1966 
definition 
therefore could encompass "diminution in value" of 
tangible property, even without any physical injury.   
The 1966 policy form was the standard in the 
insurance industry until a new form was promulgated in 
1973.  The post-1973 forms define "property damage" 
much more specifically than the 1966 form.  The first 
No. 
2003AP1331  
 
20 
 
Accordingly, the court determined that the damage and removal of 
the transformer constituted a "loss of use," because the 
plaintiff could no longer operate the furnace until the 
transformer was replaced.     
¶30 This "uselessness" requirement that originated in Sola 
Basic has been accepted in similar cases.  In McDowell-Wellman 
Engineering Co. v. Hartford Accident & Indemnity Co., 711 F.2d 
521 (3d Cir. 1983), the Third Circuit discussed the collapse of 
an ore bridge and a claim by a steel company that the collapse 
resulted in property damage to its blast furnace, which used the 
bridge for shipment of raw materials.  The court held that the 
owner of the blast furnace did not suffer a "loss of use" 
because the collapse of the ore bridge did not impair the 
                                                                                                                                                             
part 
of 
the 
1973 
definition explicitly 
requires 
"physical" injury; the second part requires "loss of 
use" of tangible property that is not physically 
injured.  Unlike the 1966 definition, neither part of 
the later definition is broad enough to encompass mere 
"diminution of value" of a product in the absence of 
physical injury or loss of use.   
Id., ¶¶46-47 (citations omitted).   
 
Our ultimate holding in Wisconsin Label, with respect to 
Sola Basic, was as follows: 
[a]ny suggestion in Sola Basic that CGL policies 
provide coverage for diminution in value that is not 
caused 
by 
physical 
injury 
or 
loss 
of 
use 
is 
inconsistent with the definition of "property damage" 
in post-1973 policies.  We therefore conclude that the 
Policy provides no coverage for diminution in value in 
the absence of physical injury or loss of use.   
Id., ¶48.  
No. 
2003AP1331  
 
21 
 
operation of the blast furnace or make it useless.  To the 
contrary, the collapse of the ore bridge only resulted in the 
"loss of use" of the ore bridge.  See Hartzell Indus., Inc. v. 
Fed. Ins. Co., 168 F. Supp. 2d 789 (S.D. Ohio 2001).  The court 
in this case did not find liability, and thus distinguished Sola 
Basic, because the removal of the transformer in Sola Basic 
"rendered 
Thunder 
Bay's 
furnaces 
inoperable 
until 
the 
transformer was replaced.  Here the collapse of the ore bridge 
did not so affect [the plaintiff's] blast furnaces which not 
only remained operable but actually continued to be operated by 
[the 
plaintiff] 
without 
interruption." 
 
McDowell-Wellman 
Engineering Co., 711 F.2d at 526.  Therefore, because the blast 
furnace was not rendered "useless," no "loss of use" damages to 
the blast furnace were covered under the policy.      
¶31 The "uselessness" requirement was recently reaffirmed 
in Wisconsin Label.  In that case, there were damage claims 
against the insured that resulted from the lost profits of 
packages that were sold at the wrong price and the cost of 
handling and relabeling the unsold packages.  Wisconsin Label, 
233 Wis. 2d, ¶¶8-10; see Arnold P. Anderson, Wisconsin Insurance 
Law, § 5.54 (4th ed. 1998).  We held that there was no coverage, 
and that for damages to constitute the "loss of use" they must 
be "rendered useless."  Wisconsin Label, 233 Wis. 2d, ¶50; 
(citing Sola Basic, 90 Wis. 2d at 654).   
 
¶32 Here, Everson's claim does not amount to anything 
approaching the uselessness of the property, as is required to 
satisfy Pekin's insurance policy provisions.  There must be a 
No. 
2003AP1331  
 
22 
 
loss of use, such as the loss of use of a transformer.  See Sola 
Basic, 90 Wis. 2d at 654.  In this case, Everson testified that 
his house could have been built where the foundation was already 
poured, only the landscaping he desired was affected.  While 
Everson's property may now be less useful, aesthetic concerns 
and landscaping problems do not render the property useless.           
C. CAUSATION NEXUS  
¶33 The next certified question asks us to determine under 
what circumstances a misrepresentation causes the "loss of use" 
of property such that a "causation nexus" exists between the 
alleged misconduct and the damage claimed.  "Without such a 
'causation nexus,' the alleged occurrence cannot cause property 
damage."  Smith, 226 Wis. 2d at 823.  We conclude that the 
misrepresentation alleged in the complaint is not sufficient to 
establish a "causation nexus" within the terms of Pekin's 
policy.    
¶34 Lorenz argues that the complaint's language clearly 
shows causation: "construction of the home which they wished to 
construct on the property [was] impossible in the location in 
which the Plaintiffs wished to build based upon the pre-sale 
representations of LORENZ. . . . "  Lorenz also argues that, 
unlike Smith, there is an unbroken chain of causation presented 
between the "occurrence" and the "property damage."  In Smith, 
we concluded that there were "too many 'interruptions' between 
the 'occurrence' and the 'property damage' —— too many decisions 
and actions by other people —— to show an unbroken chain of 
causation under the policies."  Id. at 824.  Lorenz claims that 
No. 
2003AP1331  
 
23 
 
in a situation like the claim alleged here, this court should 
find that there was a sufficient allegation of "causation 
nexus."  
 
¶35 For support of this argument, Lorenz relies on the 
court of appeals' decision in Jares v. Ullrich, 2003 WI App 156, 
266 Wis. 2d 322, 667 N.W.2d 843.9  This case involved the alleged 
misrepresentations surrounding the sale of property.  The 
buyer's complaint stated that the property was infested with 
raccoons, other animals, and animal debris, and that the seller-
insured failed to disclose that information.  The court of 
appeals held that the "complaint sufficiently alleged a nexus 
                                                 
9 The other case Lorenz argues that supports the claimed 
"causation nexus" is Wood v. Safeco Insurance Co. of America, 
980 S.W.2d 43 (Mo. App. E.D. 1998).  There, a Missouri court of 
appeals held that there was a "causation nexus" in a claim that 
is similar to the issue before us.  The insured, Wood, sold 
property to a buyer and represented that the property was not in 
a flood plain.  After the transaction, the property flooded and 
the buyer alleged negligent misrepresentation.  The buyer argued 
that if he had been advised of the existence of the flood plain, 
he would not have bought the property.  The court held: 
"[w]hether or not the flooding damage is causally related to the 
misrepresentations should have been pursued by Insurer on behalf 
of Insured in Buyer's litigation, rather than against Insured in 
this litigation."  Id. at 53 (citing Sheets, 679 A.2d at 544-
45).  
No. 
2003AP1331  
 
24 
 
between the alleged misrepresentation and the ensuing loss."  
Id., ¶24.10   
 
¶36 In Jares, the insurance policy at issue defined 
"property damage" as "'physical injury to or destruction of 
tangible property, including loss of use. . . .'"  Id., ¶12. 
There, the court interpreted the definition of "property damage" 
as "loss of use" damages that flowed from the destruction of 
tangible property.  Because the complaint alleged that the 
plaintiffs incurred repair and restoration costs, the court of 
appeals concluded that the "physical injury to . . . tangible 
property" requirement of "property damage" was met.   The court 
also held that since the complaint alleged that the seller-
insured's misrepresentations resulted in the loss of use of the 
property, the court determined that there was a sufficient 
allegation of "causation nexus."   
¶37 In this case, we have already concluded that the 
alleged misrepresentation was not an "occurrence" within the 
provisions of the insurance policy and that the complaint does 
not allege a "loss of use."  We conclude, for the reasons set 
                                                 
10 The court of appeals distinguished Smith v. Katz, 226 
Wis. 2d 798, 595 N.W.2d 345 (1999), by finding that in Jares v. 
Ullrich, 2003 WI App 156, 266 Wis. 2d 322, 667 N.W.2d 843, the 
property damage was discovered shortly after the residence was 
purchased, the defendant-sellers remained in full-ownership and 
control until closing, the residence already existed at the time 
of closing, and there was no allegation of intervening negligent 
acts by a third party.  The court also held that Qualman v. 
Bruckmoser, 163 Wis. 2d 361, 471 N.W.2d 282 (Ct. App. 1991) and 
Benjamin v. Dohm, 189 Wis. 2d 352, 525 N.W.2d 371 (Ct. App. 
1994), were not controlling, because the references to causation 
in those cases were dicta.   
No. 
2003AP1331  
 
25 
 
forth herein, that under such circumstances, "causation nexus" 
is not sufficiently alleged.    
¶38 In Qualman, the court of appeals held that the pre-
sale misrepresentation involving the structural defects did not 
constitute 
"property 
damage." 
 
Rather, 
the 
preexisting 
structural defects caused the damage.  The court concluded that 
"[t]here is no question that the defective condition of the 
house is an element of the Qualman's complaint.  Nevertheless, 
those defects cannot be considered the cause of the Qualman's 
damages, even when interpreting both the complaint and the 
policy broadly."  Qualman, 163 Wis. 2d at 367-68.  Similarly, in 
Benjamin, the court of appeals held that there was no "causation 
nexus" between the misrepresentation claims against the insured 
and the damages sustained.  In that case, the seller-insured 
sold a property that was on a landfill and, prior to closing, 
the buildings began to settle.  The court of appeals relied on 
Qualman, and held that any "property damage" and resulting "loss 
of use" suffered were caused by the structural defects, not by 
the alleged misrepresentations.  Id. at 363.       
¶39 We relied on both Qualman and Benjamin when we decided 
that there was no "causation nexus" in Smith.  In Smith, we held 
that "[t]here is no 'causation nexus' in the Smiths' complaint 
because negligent misrepresentations do not cause ground water 
pressure or cracks in concrete foundations. . . ."  Smith, 226 
Wis. 2d at 824.  Like the courts' holdings in Qualman, Benjamin, 
and Smith, we conclude that the "property damage" in this case 
was caused by the preexisting 100-year flood plain, not by any 
No. 
2003AP1331  
 
26 
 
presale misrepresentation of Lorenz.11  Since the complaint fails 
to allege "property damage" in that there is no allegation of an 
"occurrence," and no allegation of "loss of use," there is 
clearly not a sufficient allegation of a "causation nexus."     
D. EXCLUSIONS 
 
¶40 Lastly, although we decide this case on other grounds, 
we 
address 
briefly 
the 
insurance 
policy's 
exclusionary 
provisions.  Pekin contends that even if the complaint contains 
allegations sufficient to trigger coverage, and thus its duty to 
defend in accord with the general coverage sections of its 
insurance policy, this court should still hold that there is no 
such duty because certain policy exclusions are applicable.  
Since there is no need to address the exclusionary provisions 
further, 
we 
merely 
acknowledge 
that 
Pekin 
has 
presented 
extensive arguments, citing Wisconsin and federal court cases, 
in support of its position that two exclusions apply here.   
IV. CONCLUSION 
¶41 In sum, we conclude that since there is no coverage 
based on Everson's complaint and the language of the Pekin 
insurance policy, Pekin has no duty to defend and no duty to 
indemnify 
Lorenz 
against 
Everson's 
claims 
for 
strict 
responsibility and/or negligent misrepresentation.  The alleged 
misrepresentation was not an "occurrence" within the meaning of 
                                                 
11 Lorenz also argues that the "property damage" includes 
materials such as foundation, windows, building plans, and 
permits.  Because the damages resulting from the purchase of 
those items were not alleged in the complaint, we decline to 
address them here.   
No. 
2003AP1331  
 
27 
 
the policy.  We hold that Everson must plead more than "damages" 
in 
relation 
to 
the 
misrepresentation 
claims 
to 
plead 
sufficiently a "loss of use" under the policy.  We further 
conclude that since the complaint fails to allege "property 
damage," in that there is no allegation of an "occurrence," and 
no allegation of "loss of use," there clearly is not a 
sufficient allegation of "causation nexus."  The "property 
damage" was caused by defects in the property, not by any 
misrepresentations of Lorenz.   
By the Court.—The judgment of the circuit court is 
affirmed.    
 
No.  2003AP1331.llb 
 
1 
 
 
¶42 LOUIS B. BUTLER, JR., J.   (concurring).  While I 
agree with Part II of Justice Bradley's dissent (that a 
negligent misrepresentation can constitute an "occurrence" under 
Pekin's insurance policy), I agree with the majority that the 
misrepresentation alleged in the complaint is insufficient to 
establish a "causation nexus" within the terms of that insurance 
policy. Majority op., ¶33.  The preexisting 100—year flood plain 
in this case caused any "property damage," not Lorenz's presale 
misrepresentation.  Majority op., ¶39.  Accordingly, I join 
parts I, II and III(C) of the majority opinion.  I therefore 
respectfully concur.       
 
 
 
 
No.  2003AP1331.awb 
 
1 
 
 
 
¶43 ANN WALSH BRADLEY, J.   (dissenting).  In Smith v. 
Katz, 226 Wis. 2d 798, 822, 595 N.W.2d 345 (1999), this court 
left open the question of whether a negligent misrepresentation 
can constitute an "occurrence" or "accident" for purposes of 
general liability insurance.  Today, the majority seemingly 
resolves this matter, but does so by skewing the focus of the 
inquiry and ignoring the "negligent" component of the negligent 
misrepresentation. 
 
Because 
I 
conclude 
that 
the 
alleged 
negligent misrepresentation in this case can constitute an 
"occurrence," and because the Eversons' complaint sufficiently 
alleges the remaining elements necessary to trigger a duty to 
defend, "loss of use" and "causation," I respectfully dissent. 
I 
¶44 The 
majority 
concludes 
that 
"where 
there 
is 
a 
volitional act involved in such a misrepresentation, that act 
removes it from coverage as an 'occurrence' under the liability 
insurance policy."  Majority op., ¶20.  The problem with the 
majority opinion lies not with this conclusion.  Rather, the 
problem arises when in identifying the relevant act, the 
majority shifts focus from a specific non-volitional act to a 
more general volitional act.  Of course, if the level of 
generality is extended far enough, a volitional act can always 
be found somewhere down the line. 
¶45 As in many cases, the relevant facts here drive the 
analysis.  Lorenz gave the Eversons a Real Estate Condition 
Report that contained a typographical error, mistaking Lot 21 
No.  2003AP1331.awb 
 
2 
 
for Lot 31.  The parties agree that the Eversons' Lot 31 has a 
portion of the property in the flood plain, but the Real Estate 
Condition Report failed to disclose that fact.  Instead, the 
report erroneously listed Lot 21 as part of the flood plain.   
¶46 The Eversons attached to the complaint the Real Estate 
Condition Report which stated, "[s]ome lots as shown on Exhibit 
A attached have as part of their back lots land that lies within 
the approximate 100[-]year flood plain.  On lots 14-22 this area 
falls in the wooded ravine area and for lots 23-27, 21 & 32 it 
falls within the grassland area on the back of the lots."  
(Emphasis added.) 
¶47 According to the complaint, the Eversons received the 
Real Estate Condition Report, which provided that "no portion of 
Lot 31 lay within the 100[-]year flood plain."  When they 
purchased Lot 31, the Eversons received a Warranty Deed, 
incorporating by reference the representations contained in the 
report.  After the transaction was completed, the Eversons 
discovered that a substantial portion of Lot 31 was located 
within a 100-year flood plain.  They alleged that the flood 
plain made "the construction of the home which they wished to 
construct on the property impossible in the location in which 
the 
Plaintiffs 
wished 
to 
build 
based 
upon 
the 
pre-sale 
representations of LORENZ."  As a result, they sustained damages 
having already paid for items that they could no longer use.   
 
¶48 The majority, however, tucks away in a footnote the 
relevant facts of the negligent misrepresentation claim.  Id., 
¶5, n. 3.  In doing so, it shifts the focus away from the 
No.  2003AP1331.awb 
 
3 
 
accidental typographical error contained in the report and 
instead focuses in the text on the general action that Lorenz 
gave the report to Everson.  Id., ¶22.  Consequently, the 
majority then opines that there is no accident here at all 
because the decision to give Everson the report is not an 
"accident."  Id.  Accordingly, the majority concludes that 
because there is no accident, there is no coverage under the 
policy. 
 
¶49 No one asserts that the "act" of giving the report was 
an accident.  Of course it was volitional or intentional.  As 
part of the real estate transaction, Lorenz needed to provide 
the Real Estate Condition Report. 
 
¶50 Stripped 
to 
its 
essentials, 
the 
majority 
here 
determines that an accidental act (a typographical error) is not 
an accident.  How can it arrive at such an anomalous conclusion?  
Only by skewing the focus as described above and ignoring the 
"negligent" component of a negligent misrepresentation claim.  
II 
¶51 As noted, the question left open by Smith, 226 
Wis. 2d 798, and that we address today is whether the alleged 
negligent 
misrepresentation 
of 
Lorenz 
can 
constitute 
an 
"occurrence" under Pekin's insurance policy.  In the policy, 
"occurrence" is defined as "an accident, including continuous or 
repeated exposure to substantially the same general harmful 
conditions."  Because the policy does not elaborate on the term 
"accident," the majority proffers two definitions for guidance:  
(1) "[a]n 
unintended and 
unforeseen 
injurious 
occurrence; 
No.  2003AP1331.awb 
 
4 
 
something that does not occur in the usual course of events or 
that could not be reasonably anticipated;" and (2) "'[a]n 
unexpected, undesirable event'" or "'an unforeseen incident'" 
which is characterized by a "'lack of intention.'"  Majority 
op., ¶15 (citations omitted). 
¶52 Both of the definitions cited by the majority center 
on 
an 
unintentional 
and 
unforeseeable 
event 
leading 
to 
undesirable results.  In this case, the alleged negligent 
misrepresentation of Lorenz meets these criteria.  However, in 
its efforts to convince the reader that there was no accident, 
the majority emphasizes only "misrepresentation" and ignores the 
"negligent" component of the negligent misrepresentation claim.  
It defines Lorenz's misrepresentation as an "'act of making a 
false or misleading statement about something . . . .'"  Id., 
¶19 (citing Black's Law Dictionary 1016 (7th ed. 1999)).  This 
characterization 
in 
itself 
is 
a 
"false 
and 
misleading 
statement," for the conduct at issue is Lorenz's alleged 
negligent misrepresentation. 
¶53 Negligent 
misrepresentation 
is 
defined 
as 
"[a] 
careless or inadvertent false statement in circumstances where 
care should have been taken."  Black's Law Dictionary 1016 (7th 
ed. 1999).  Unlike the majority, I have little trouble 
concluding that a reasonable insured would expect the term 
"accident" 
to 
include 
a 
"careless 
or 
inadvertent 
false 
statement."  On this matter, I find the case of Sheets v. 
Brethren Mut. Ins. Co., 679 A.2d 540 (Md. 1996), instructive. 
No.  2003AP1331.awb 
 
5 
 
¶54 In 
Sheets, 
the 
Maryland 
court 
of 
appeals 
was 
confronted with whether negligent misrepresentation constituted 
an "occurrence" under a general liability insurance policy.  
Ultimately, the court was persuaded by a number of cases 
recognizing that negligent misrepresentation can be considered 
an "occurrence" or "accident."  Id. at 550 (citing SL Industries 
v. American Motorists Ins. Co., 607 A.2d 1266, 1276-77 (N.J. 
1992) ("Courts generally have held that although the insurer 
must defend an insured who is accused of reckless, negligent, or 
innocent misrepresentations, no defense is required when the 
insured 
is 
accused 
of 
intentional 
misrepresentations."); 
Universal Underwriters v. Youngblood, 549 So.2d 76, 78, 79 (Ala. 
1989) ("[t]he term 'accident' does not exclude events that occur 
through negligence," and that "[a]ctions for innocent or 
reckless misrepresentation have held to be covered"); First 
Newton Nat. Bank v. Gen. Casualty Co., 426 N.W.2d 618, 625-26 
(Iowa 
1988) 
("[t]he 
very 
definition 
of 
'negligent 
misrepresentation' connotes negligent rather than intentional 
conduct. . . . '[W]here a complaint is framed in terms of an 
insured's negligence . . . there is a duty to defend.'")).   
¶55 As this court stated in Smith, 226 Wis. 2d at 822, the 
decision in Sheets is "strikingly similar" to our negligence 
analysis in Doyle v. Engelke, 219 Wis. 2d 277, 580 N.W.2d 245 
(1998).  In Doyle, we held that an insurance policy using the 
term "event" covered negligent acts.  219 Wis. 2d at 290.  The 
policy at issue in that case defined "event" the same as this 
policy 
defines 
"occurrence," 
as 
"'an 
accident, 
including 
No.  2003AP1331.awb 
 
6 
 
continuous or repeated exposure to substantially the same 
general harmful conditions.'"  Id. at 289.  We observed that 
both the definition for "negligence" and "accident" "center on 
an unintentional occurrence leading to undesirable results."  
Id. at 290.  Thus, we concluded that a reasonable insured would 
expect the policy provision using the term "event" to cover 
negligent acts.  Id.  Because the conduct in this case also 
involves 
a 
negligent 
act, 
Doyle 
cannot 
be 
meaningfully 
distinguished.  
¶56 Accordingly, 
I 
would 
conclude 
that 
a 
negligent 
misrepresentation can constitute an "occurrence" or "accident" 
for purposes of general liability insurance.  After all, 
language in an insurance policy must be construed as understood 
by a reasonable person in the position of an insured.  Frost v. 
Whitbeck, 2002 WI 129, ¶20, 257 Wis. 2d 80, 654 N.W.2d 225 
(citing 
Kremers-Urban 
Co. 
v. 
Am. 
Employers 
Ins., 
119 
Wis. 2d 722, 735, 351 N.W.2d 156 (1984)).  In this case, a 
reasonable person would not split the legal hair advanced by the 
majority.  See majority op., ¶20.  Rather, a reasonable person 
would expect that the policy would cover the typological error 
relied upon by Everson in the pre-sale representation.12 
 
 
                                                 
12 Alternatively, I note that to the extent the term 
"accident" is ambiguous, it must be construed against an insurer 
and in favor of coverage.  Frost v. Whitbeck, 2002 WI 129, ¶19, 
257 Wis. 2d 80, 654 N.W.2d 225 (citing Danbeck v. Am. Family 
Mut. Ins. Co., 2001 WI 91, ¶10, 245 Wis. 2d 186, 629 N.W.2d 
150). 
No.  2003AP1331.awb 
 
7 
 
III 
¶57 Having 
determined 
that 
the 
alleged 
negligent 
misrepresentation can constitute an "occurrence," I consider 
next whether the Eversons' complaint sufficiently alleges the 
remaining elements necessary to trigger a duty to defend, "loss 
of use" and "causation."  Again, the majority opinion blurs the 
inquiry by focusing much of its discussion on the sufficiency of 
the evidence or the underlying merits of the claim rather than 
on the four corners of the complaint and the terms of the 
insurance policy.  Id., ¶¶28-32.  However, "[t]he duty to defend 
focuses on the nature of the claim and has nothing to do with 
the merits of the claim."  Smith, 226 Wis. 2d at 806 (citing 
Grieb v. Citizens Casualty Co., 33 Wis. 2d 552, 558, 148 N.W.2d 
103 (1967)) (emphasis added).  Accordingly, the fact that the 
Eversons' claim may not amount to anything approaching the 
standard of "uselessness" is irrelevant. 
¶58 The question in this case is whether Pekin's insurance 
policy 
provides 
coverage 
to 
Lorenz 
for 
the 
negligent 
misrepresentation claim filed by Everson.  The answer to this 
question lies in comparing the allegations of the claim set 
forth in the complaint to the terms of the insurance policy.  
Id. (citing School Dist. of Shorewood v. Wausau Ins. Co., 170 
Wis. 2d 347, 364-65, 488 N.W.2d 82 (1992)). 
¶59 When focusing on the nature of the claim, courts must 
liberally construe the allegations in the complaint and assume 
all reasonable inferences.  Doyle, 219 Wis. 2d at 284.  While 
the majority mouths this standard, it fails to apply it here.  
No.  2003AP1331.awb 
 
8 
 
Majority op., ¶25.  The relevant allegation is set forth in 
paragraph seven of the complaint.  It states: 
7. Subsequently, the Plaintiffs discovered that a 
substantial portion of Lot 31 lay within the 100[-] 
year flood plain making the construction of the home 
which they wished to construct on the property 
impossible in the location in which the Plaintiffs 
wished 
to 
build 
based 
upon 
the 
pre-sale 
representations of LORENZ, rendering the property 
unbuildable 
for 
the 
Plaintiffs 
and 
causing 
the 
Plaintiffs to incur damages as a result in excess of 
$37,000. 
¶60 Although this paragraph does not use the "magic words" 
the majority apparently seeks, it should not have to do so.  See 
Smith, 226 Wis. 2d at 817 (a complaint claiming negligent 
misrepresentation need 
only 
"contain 
some 
statement 
about 
physical injury to tangible property, some reference to loss of 
use, or some demand for relief beyond money damages . . . ").  
Here, the allegations are tantamount to a claim for "loss of 
use" under a liberal construction.  The plaintiffs allege that a 
substantial portion of their property lay within the 100-year 
flood plain, making the construction of the home impossible in 
the location in which they wanted to build.  They seek 
compensation based on Lorenz's negligent misrepresentation for 
out-of-pocket 
expenses, 
which 
are 
now 
useless 
to 
them.  
Accordingly, one can reasonably infer the "loss of use" of 
various items relating to that failed construction (e.g., 
excavation, concrete foundation, house plans, permits, etc.). 
¶61 Likewise, 
I 
am 
satisfied 
that 
the 
complaint 
sufficiently alleges "causation" under a liberal construction.  
Again, the relevant language is found in paragraph seven:  
No.  2003AP1331.awb 
 
9 
 
"[c]onstruction of the home which they wished to construct on 
the property [was] impossible in the location in which the 
Plaintiffs 
wished 
to 
build 
based 
upon 
the 
pre-sale 
representations of LORENZ . . . ."  The majority dismisses this 
language, concluding that the "'property damage' in this case 
was caused by the preexisting 100-year flood plain, not by any 
presale misrepresentation of Lorenz."  Majority op., ¶39.  
However, for purposes of summary judgment, I believe it can be 
reasonably 
inferred 
that 
reliance 
on 
Lorenz's 
pre-sale 
representations caused the Eversons' damage.  Accordingly, for 
the foregoing reasons I respectfully dissent. 
¶62 I am authorized to state that CHIEF JUSTICE SHIRLEY S. 
ABRAHAMSON joins this dissent.   
 
No.  2003AP1331.awb 
 
 
 
1