Title: Fontana Builders, Inc. v. Assurance Co. of Am.
Citation: N/A
Docket Number: 2014AP000821
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: June 29, 2016

2016 WI 52 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2014AP821 
COMPLETE TITLE: 
Fontana Builders, Inc., 
          Plaintiff-Appellant-Petitioner, 
Anchorbank, FSB, 
          Intervening  
          Plaintiff-Co-Appellant-Petitioner, 
     v. 
Assurance Company of America, 
          Defendant-Respondent. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
(Reported at 362 Wis. 2d 539, 865 N.W.2d 884) 
(CT. App. 2015 – Unpublished) 
 
 
OPINION FILED: 
June 29, 2016 
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
December 15, 2015 
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit 
 
COUNTY: 
Walworth 
 
JUDGE: 
Phillip A. Koss 
 
 
 
JUSTICES: 
 
 
CONCURRED: 
BRADLEY, A. W., J. and ABRAHAMSON, J. concur 
(Opinion filed). 
 
CONCURRED/DISSENTED: 
DISSENTED: 
BRADLEY, R. G., J. concurs and dissents 
(Opinion filed). 
 
NOT PARTICIPATING: 
         
 
 
 
ATTORNEYS: 
 
For the plaintiff-appellant-petitioner, there were briefs 
by Chris J. Trebatoski and Law Offices of Chris J. Trebatoski, 
LLC, Milwaukee and oral argument by Chris J. Trebatoski. 
 
For 
the 
intervening 
plaintiff-co-appellant-petitioner, 
there were briefs by Norman D. Farnam, John J. Laubmeier and 
Stroud, Willink & Howard, LLC, Madison and oral argument by 
Norman D. Farnum. 
 
 
 
 
 
2 
For the defendant-respondent, there was a brief by William 
W. Ehrke, and Crivello Carlson, S.C., Milwaukee and John J. 
McInerney, and Leahy, Eisenberg & Fraenkel, Chicago. Oral 
argument by William W. Ehrke.   
 
There was an amicus curiae brief by John E. Knight, Kirsten 
E. Spira and Boardman & Clark LLP, Madison, on behalf of the 
Wisconsin Bankers Association.  
 
 
 
 
 
2016 WI 52
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2014AP821   
(L.C. No. 
2008CV562) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Fontana Builders, Inc., 
 
          Plaintiff-Appellant-Petitioner, 
 
Anchorbank, FSB, 
 
          Intervening Plaintiff- 
          Co-Appellant-Petitioner, 
 
     v. 
 
Assurance Company of America, 
 
          Defendant-Respondent. 
 
 
 
FILED 
 
JUN 29, 2016 
 
Diane M. Fremgen 
Clerk of Supreme Court 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Reversed and 
cause remanded. 
 
¶1 
DAVID T. PROSSER, J.   This is a review of an 
unpublished decision of the court of appeals1 affirming judgments 
                                                 
1 Fontana Builders, Inc. v. Assurance Co. of Am., No. 
2014AP821, unpublished slip op. (Wis. Ct. App. Apr. 1, 2015) 
(per curiam). 
No. 
  2014AP821 
2 
entered in favor of Assurance Company of America2 (Assurance) 
against its insured, Fontana Builders, Inc.3 (Fontana), and 
Fontana's lender, AnchorBank, FSB (AnchorBank). 
¶2 
The case involves a complicated insurance coverage 
dispute arising out of a 2007 fire that destroyed portions of a 
high-end custom home that was still under construction in Lake 
Geneva.  The fire caused major damage not only to the home but 
also to the personal property of the home's occupants, who were 
the presumptive purchasers of the home upon its completion. 
¶3 
Both the construction contractor, Fontana, and the 
occupants/presumptive purchasers, James and Suzy Accola (the 
Accolas), had separate insurance policies.  After the fire, the 
Accolas settled with Chubb Insurance Co. (Chubb), the insurer 
that 
provided 
their 
homeowner's 
policy, 
and 
received 
a 
substantial payment.  Assurance then denied all coverage to 
Fontana for the fire, relying on the "permanent property 
insurance" condition in its builder's risk policy as grounds for 
the denial.  Assurance's denial of coverage upset not only 
Fontana but also Fontana's mortgagee, AnchorBank, and James 
                                                 
2 Though the complaint named "Zurich Assurance Company of 
America" as a defendant, the parties later agreed that Assurance 
Company of America was the appropriate party defendant. 
3 Originally incorporated in Illinois in February 2002, 
Fontana Builders, Inc. involuntarily dissolved on July 10, 2009, 
after failing to file an annual report and failing to pay an 
annual franchise tax. 
No. 
  2014AP821 
3 
Accola, Fontana's president and sole shareholder who had 
personally guaranteed AnchorBank's loan. 
¶4 
In this factually complicated case, there have been 
two jury trials and two appeals, although this is the first 
appeal to reach this court.  The parties have raised numerous 
issues. Upon reflection, however, we see two fundamental 
questions presented to the court.  First, is the interpretation 
of the "permanent property insurance" condition in the builder's 
risk policy a question of fact for a jury or a question of law 
for the court?  Second, if the interpretation of the "permanent 
property insurance" condition is a question of law, did that 
condition terminate Fontana's coverage under the builder's risk 
policy? 
¶5 
We conclude that the court of appeals incorrectly 
determined that interpretation of Assurance's builder's risk 
policy was a question of fact for a jury in this case, and we 
reaffirm the general principle that interpretation of insurance 
contracts presents a question of law for the court.  We further 
conclude that the homeowner's policy in this case did not 
"apply" so as to terminate Fontana's builder's risk policy 
because Fontana and the Accolas insured different interests in 
the property.  Fontana had a reasonable expectation that 
coverage would persist under the builder's risk policy while 
construction continued and Fontana remained the owner of the 
property.  Accordingly, we reverse the decision of the court of 
No. 
  2014AP821 
4 
appeals and remand to the circuit court for the determination of 
damages.4 
I.  FACTUAL BACKGROUND 
A.  Fontana's Construction Business 
¶6 
Fontana designed and built "spec" homes, speculative 
custom houses for which Fontana obtained financing and began 
construction before securing a buyer for the finished structure.  
When constructing a spec home, Fontana owned the house and was 
responsible for any mortgage until closing a sale to an eventual 
buyer.  In the years preceding the fire, Fontana had built and 
sold 16 or 17 custom homes.  At any given time, Fontana would 
normally have between one and three homes under construction. 
¶7 
James Accola was the president and sole shareholder of 
Fontana Builders, Inc.  On three or four occasions, he and his 
wife, Suzy Accola, had purchased a completed home from Fontana 
and moved in with their three children.  Before the fire damaged 
                                                 
4 Fontana, AnchorBank, and Assurance devote substantial 
portions of their briefs to Fontana and AnchorBank's additional 
argument that, at the second trial, the circuit court improperly 
permitted the jury to consider evidence of the Chubb settlement 
under Wis. Stat. § 904.08 (2013-14).  Because we reverse based 
on our interpretation of the Assurance policy, we need not 
address this issue.  See Hofflander v. St. Catherine's Hosp., 
Inc., 2003 WI 77, ¶102, 262 Wis. 2d 539, 664 N.W.2d 545 ("As a 
general rule, when our resolution of one issue disposes of a 
case, we will not address additional issues." (quoting Hull v. 
State Farm Mut. Auto. Ins. Co., 222 Wis. 2d 627, 640 n.7, 586 
N.W.2d 863 (1998))). 
All subsequent references to the Wisconsin Statutes are to 
the 2013-14 version unless otherwise indicated. 
No. 
  2014AP821 
5 
the Lake Geneva home, the Accolas intended to purchase the home 
after Fontana finished construction. 
¶8 
The home at issue, located at 1527 Muirfield Court, 
represented a substantial investment for Fontana.  Nearly all of 
Fontana's assets were invested in the house, which the company 
planned to use to generate new opportunities for itself in the 
high-end housing market.  The home was larger and included more 
detailed interior work than any previous Fontana-built home.  
Accola testified at the second trial that he intended to use the 
home to "showcase" Fontana as "one of the premier builders in 
the Lake Geneva area."  As the home's owner, Accola would have 
unfettered access to an example of Fontana's finished work when 
he courted prospective buyers.  He had even arranged for a photo 
spread featuring the house in Trends, a nationally distributed 
magazine. 
¶9 
Fontana financed the project's construction through 
two mortgages with AnchorBank.  The first mortgage, dated 
November 29, 2005, secured a $1.076 million loan.  A subsequent 
mortgage, dated April 23, 2007, secured a $200,000 loan.  Accola 
provided a personal guarantee on Fontana's loans and mortgages. 
B.  Fontana's Builder's Risk Coverage from Assurance 
¶10 As 
a 
standard 
condition 
of 
making 
the 
loans, 
AnchorBank required Fontana to obtain builder's risk insurance 
covering the home during construction.  Fontana purchased two 
policies from Assurance Company of America, which had provided 
builder's 
risk 
coverage 
for 
previous 
Fontana 
projects.  
Initially, Fontana purchased a new policy providing up to 
No. 
  2014AP821 
6 
$800,000 in coverage for the Lake Geneva property.  Effective 
for one year from October 19, 2005, the policy corresponded to 
the November 2005 loan from AnchorBank. 
¶11 Fontana acquired the Assurance policy at issue in this 
case when it sought the second AnchorBank loan to cover 
increased project costs during construction.  Because the 
previous policy had lapsed in October 2006, Assurance issued a 
new builder's risk policy providing $1.495 million in coverage, 
effective for one year from April 19, 2007.5  The policy listed 
"Fontana Builders, Inc." as the named insured. 
                                                 
5 Fontana worked with Scott Anderson from Rand-Tec Insurance 
Agency when procuring both Assurance policies.  As an agent for 
Assurance, Anderson used Assurance's computerized underwriting 
system, which automatically bound and issued a policy when an 
agent entered information within certain parameters.  At the 
time that Anderson procured the April 2007 Assurance policy for 
Fontana, 
he 
knew 
that 
the 
project 
costs 
had 
increased 
substantially since the issuance of the first policy, that the 
municipality had changed the street address for the home, and 
that Fontana had completed approximately 18 months worth of work 
on the project. 
Testimony during the first trial called into question 
Anderson's methods when completing Fontana's application for the 
second policy.  An underwriter from Zurich Insurance Services 
explained that the computerized underwriting system in place in 
April 2007 would place a "hold" on an application if the agent 
entered numbers requesting builder's risk coverage exceeding 
$100 per square foot.  A hold would have triggered review by a 
human underwriter and prevented automatic issuance of the 
policy.  Anderson entered "15,000" as the home's square footage, 
and the application never triggered a hold.  Because the home 
was actually closer to 12,000 square feet in size, the correct 
coverage-to-size ratio would have exceeded $100 per square foot.  
An underwriter testified during the first trial that, had a hold 
properly occurred, a human underwriter reviewing the application 
would have declined to issue a policy based on the significant 
percentage of the structure already completed before April 2007. 
No. 
  2014AP821 
7 
¶12 Under the builder's risk policy, Assurance agreed to 
"pay for direct physical loss to Covered Property from any 
Covered Cause of Loss described in [the] Coverage Form."  
Covered Property included "[p]roperty which has been installed, 
or is to be installed in any commercial structure and/or any 
single family dwelling, private garage, or other structures that 
will be used to service the single family dwelling."  However, 
Covered Property did not include existing inventory, which the 
policy defined as "buildings or structures where construction 
was started or completed prior to the inception date of [the] 
policy."  The policy defined "loss" as "accidental loss and 
accidental damage," and "Covered Cause of Loss [meant] risk of 
direct physical loss to Covered Property, except those causes of 
loss listed in the Exclusions."  The exclusions did not preclude 
coverage for fire damage. 
¶13 A separate section of the policy specified additional 
conditions for coverage: 
3. 
WHEN COVERAGE BEGINS AND ENDS 
We will cover risk of loss from the time when you 
are legally responsible for the Covered Property on or 
after the effective date of the policy if all other 
conditions are met.  Coverage will end at the earliest 
of the following: 
a. 
Once your interest in the Covered Property 
ceases; 
b. 
Ninety days after initial occupancy of the 
Covered Property . . . [;] 
. . . . 
No. 
  2014AP821 
8 
c. 
When the Covered Property is leased to or 
rented to others[;] 
. . . . 
d. 
When you abandon the reported location with 
no intention to complete it; 
e. 
At the end of 12 months from the month when 
you first reported the location to us unless you 
report the location again and pay an additional 
premium. . . . ; 
f. 
When permanent property insurance applies; 
g. 
Once the Covered Property is accepted by the 
owner or buyer. 
(Emphasis added.) 
C.  The Accolas' Homeowner's Policy from Chubb 
¶14 James Accola obtained a 30-day temporary occupancy 
permit dated May 30, 2007, and, shortly thereafter, the Accolas 
moved most of their personal property into the home.  Although 
the Accolas began residing in the home, Fontana continued 
interior work preparing the home for permanent occupancy.  
Fontana remained the home's owner and had not yet closed a sale 
or transferred title to the Accolas. 
¶15 In anticipation of purchasing the home, the Accolas 
acquired a homeowner's policy from Chubb Insurance Co.  The 
policy listed "Jim Accola" and "Susy [sic] Accola" as the named 
insureds, and it listed "Anchor Bank" as the mortgagee.  
Effective for one year from June 21, 2007, the coverage summary 
explained: "Your policy provides coverage against physical loss 
if your home or its contents are damaged, destroyed, or lost."  
No. 
  2014AP821 
9 
It provided $2 million of deluxe coverage for the dwelling and 
$1 million of deluxe coverage for the home's contents. 
¶16 Additionally, the policy provided coverage for extra 
living expenses under certain circumstances: 
If your house cannot be lived in because of a covered 
loss, we cover any increase in your living expenses 
that is necessary to maintain your household's normal 
standard of living.  We cover these expenses for the 
reasonable amount of time it should take to repair or 
rebuild your house, or for your household to relocate, 
even if the policy period ends during that time. 
D.  The Fire and Its Aftermath 
¶17 The fire occurred late on the night of June 28, 2007.  
A Fontana employee working on the property during the day left 
rags used for wood staining in the garage, and those rags 
spontaneously combusted.  Awakened by smoke alarms shortly after 
falling asleep, Accola immediately smelled smoke in the house.  
With thick smoke filling the home's interior, Accola retrieved 
his two youngest children from an upstairs bedroom and exited 
the house.6 
¶18 In addition to destroying the garage and a Suburban 
sitting in the driveway, the fire damaged portions of the 
residence adjacent to the garage.  Salvageable portions of the 
property suffered extensive damage from smoke, heat, water, and 
chemical fire suppressants.  The Accolas lost virtually all 
their personal property in the fire; many items not yet moved 
                                                 
6 Accola's wife and eldest child were out of town on the 
night of the fire. 
No. 
  2014AP821 
10 
into the house itself were stored temporarily in a bonus room 
above the garage. 
¶19 After the fire, the Accolas submitted a claim to Chubb 
for damages to their property.  They signed a Non-Waiver 
Agreement allowing Chubb to investigate the claim without 
acknowledging that the homeowner's policy provided coverage for 
the Accolas.7  Without admitting that the policy provided 
coverage to the Accolas for the fire loss, Chubb began adjusting 
the claim after determining that the policy was in force on the 
night of the fire and that the policy provided coverage for fire 
damage generally.  As part of the adjustment process, Chubb 
procured damage estimates from two restoration companies.  One 
company estimated fire damages of $1,324,000.35, and the other 
estimated damages of $1,391,116.54.  While Chubb adjusted the 
claim, it made various payments to the Accolas totaling 
$113,686.81, but Chubb made the payments on the condition that 
                                                 
7 By the terms of the agreement, the Accolas and Chubb 
mutually acknowledged that  
any action taken [by Chubb] . . . in investigating the 
cause of loss, in investigating whether or not 
coverage is or was in force, and in investigating and 
ascertaining the amount of sound value, or the amount 
of loss and damage which occurred [as a result of the 
fire] . . . shall not waive or invalidate any of the 
terms or conditions of any policy or policies, if 
policy or policies are or were in force, and shall not 
waive or invalidate any rights whatsoever of either of 
the parties . . . with respect to any claims or 
defenses that they may have with respect to the loss 
and damage. 
No. 
  2014AP821 
11 
it could recover the money in the event it determined that the 
policy did not cover the loss.  Ultimately, the Accolas filed 
two proofs of loss, one claiming $2,010,683.67 for damages to 
the structure and the other claiming $509,740 for damages to the 
home's contents. 
¶20 Separate from the Accolas' claim with Chubb, Fontana 
made a claim with Assurance under the builder's risk policy.  
Assurance began investigating Fontana's claim after James Accola 
signed a Non-Waiver Agreement on Fontana's behalf. 
¶21 In January 2008, the insurance companies with policies 
implicated by the fire engaged in mediation in an effort to 
resolve the various claims made by the Accolas and Fontana.  
Assurance, Chubb, and Westfield Insurance8 all participated in 
                                                 
8 Westfield was Fontana's liability insurer at the time of 
the fire.  Accola v. Fontana Builders, Inc., 2010 WI App 143, 
¶3, 330 Wis. 2d 41, 792 N.W.2d 635.  After the mediation failed 
to produce a settlement, the Accolas filed suit against Fontana 
and Westfield.  The Accolas alleged negligent damage to their 
personal property caused by the Fontana employee's failure to 
properly dispose of the rags that caused the fire.  Id., ¶¶2-3.  
The 
circuit 
court 
initially 
granted 
summary 
judgment 
to 
Westfield on the grounds that the policy excluded from coverage 
personal property within Fontana's "care, custody, or control."  
Id., ¶4.  But the court of appeals reversed that decision, 
reasoning that Westfield had not demonstrated that the Accolas' 
personal property was "under the supervision of [Fontana] and 
necessary to the work involved."  Id., ¶¶12-15 (first citing 
Meiser v. Aetna Cas. & Sur. Co., 8 Wis. 2d 233, 236, 238, 98 
N.W.2d 919 (1959); then citing Silverton Enters., Inc. v. Gen. 
Cas. Co. of Wis., 143 Wis. 2d 661, 670-71, 422 N.W.2d 154 (Ct. 
App. 1988)).  The court of appeals remanded the case to the 
circuit court to determine the extent of Fontana and Westfield's 
liability to the Accolas.  The Accolas ultimately received 
$400,000 from Westfield. 
No. 
  2014AP821 
12 
the 
mediation, 
which 
did 
not 
result 
in 
a 
comprehensive 
settlement. 
¶22 Following 
the 
mediation, 
Chubb 
entered 
into 
a 
settlement agreement with the Accolas.9  Chubb agreed to pay the 
Accolas $1.5 million to dispose of their claim.  The agreement 
allocated 
$519,000 
of 
the 
settlement 
proceeds 
toward 
"replacement costs of the [Accolas'] personal property" and 
$330,000 toward their "additional living expenses," with the 
remainder allocated toward "[a]ny other interest the [Accolas] 
may have in the premises."  The settlement total included the 
$113,686.81 that Chubb had already paid to the Accolas, as well 
as outstanding invoices totaling $53,275.54 that Chubb agreed to 
pay to a restoration company.  Chubb agreed to issue two checks 
to satisfy the balance of the settlement total: one check for 
$537,323.19 payable to "Jim Accola and Suzy Accola and Anchor 
Bank," and one check for $795,714.46 payable to "Jim Accola and 
Suzy Accola."  Additionally, the agreement specifically provided 
that the settlement "[was] not an admission by [Chubb] that 
coverage is provided under the Policy for the Fire Claim." 
¶23 After the Accolas agreed to the settlement with Chubb, 
Fontana sent a letter to Assurance demanding payment under the 
builder's risk policy.  Drawing on one of the restoration 
                                                 
9 The specific date of the agreement is ambiguous.  Though 
the agreement's introductory language indicates that it is 
"dated January 31, 2008," the Accolas signed the agreement on 
March 5, 2008, and Chubb's representative signed the agreement 
on March 4, 2008. 
No. 
  2014AP821 
13 
estimates 
obtained 
by 
Chubb, 
the 
letter 
requested 
a 
$1,391,116.52 payment. 
¶24 Assurance denied coverage after concluding that the 
policy did not cover the fire loss for three reasons.  First, 
Assurance claimed that Fontana's coverage ended under the 
builder's risk policy when the Accolas' homeowner's policy with 
Chubb became effective on June 21, 2007.  The builder's risk 
policy provided that coverage would end "[w]hen permanent 
property insurance applies," and Assurance concluded that the 
homeowner's insurance constituted permanent property insurance 
that applied, thus terminating the Assurance policy.  Second, 
Assurance asserted that the policy's "other insurance" clause 
rendered it excess to the Chubb policy and inapplicable because 
the $1,391,116.52 demanded did not exceed the Chubb policy's $2 
million limit.  Finally, Assurance asserted that the policy 
provided no coverage for the portion of the structure that 
existed prior to the policy's April 2007 effective date. 
II.  PROCEDURAL HISTORY 
¶25 Fontana responded to Assurance's denial of coverage by 
commencing this action on May 6, 2008.  The complaint alleged 
causes of action for breach of the insurance contract and for 
bad faith failure to pay under the policy. 
¶26 Assurance moved for summary judgment, but the Walworth 
County Circuit Court10 concluded that the Assurance policy 
                                                 
10 James L. Carlson, Judge. 
No. 
  2014AP821 
14 
provided coverage for the fire damage.  The circuit court 
reasoned that the builder's risk policy "was still in force 
because the builder had not completed the work.  It had not been 
turned over unconditionally to the owner and was not in the 
owner's name on the title."  Furthermore, Fontana's interest in 
the property "had not ceased . . . yet."  Additionally, the 
court added that it thought the Accolas' settlement with Chubb 
was irrelevant to its interpretation of the Assurance policy. 
¶27 The case proceeded to a bifurcated trial on Fontana's 
breach of contract and bad faith claims.  Because the court had 
decided that the Assurance policy provided coverage, the first 
phase focused on the amount of money owed to Fontana for fire 
damage to the property.  Accordingly, the jury received a 
special verdict question at the end of the first phase: "What 
sum 
of 
money 
will 
fairly 
and 
reasonably 
compensate 
the 
Plaintiff, Fontana Builders, Inc. for the losses it sustained 
due to the fire at the Muirfield Court property on June 28, 
2007?"  A unanimous jury answered $1,391,116.54. 
¶28 During the second phase, the jury heard evidence on 
Fontana's claim that Assurance denied coverage in bad faith.  
The jury received a two-part special verdict question.  First, 
the special verdict form asked, "Did Defendant, Assurance 
Company of America, exercise bad faith in denying the claim of 
the Plaintiff, Fontana Builders, Inc.?"  If the jury answered 
"yes," the form then asked, "What sum of money will fairly and 
reasonably compensate Plaintiff, Fontana Builders Inc., for 
Defendant, Assurance Company of America's bad faith in denying 
No. 
  2014AP821 
15 
the claim of Fontana Builders?"  Ten of twelve jurors answered 
"yes" to the first question and awarded $1,218,118 under the 
second. 
¶29 Assurance appealed, and the court of appeals reversed 
in an unpublished decision.  Fontana Builders, Inc. v. Assurance 
Co. of Am. (Fontana I), No. 2010AP2074, unpublished slip op. 
(Wis. Ct. App. Dec. 7, 2011).  The court of appeals concluded 
that "the circuit court erred when it found as a matter of law 
that the builder's risk policy provided coverage."  Id., ¶1.  
Citing its own decision in Central Auto Co. v. Reichert, 87 
Wis. 2d 9, 273 N.W.2d 360 (Ct. App. 1978), the court of appeals 
relied on the proposition that "when the words or terms in [a] 
contract must be construed using extrinsic evidence, the 
question is one for the trier of fact."  Id., ¶8.  Applying that 
legal principle, the court of appeals determined that "the 
question of whether coverage existed" on the day of the fire 
presented a question of fact for the jury.  Id., ¶1. 
¶30 The court of appeals provided instructions for the 
second round of circuit court proceedings: "[T]he jury will have 
to determine whether permanent property insurance applied at the 
time of the fire.  The circuit court may not preclude the jury 
from considering the Chubb policy or any other extrinsic 
evidence that is relevant to Section E.3 of the policy."  Id., 
¶11 (footnote omitted).  In addition, the court of appeals noted 
that any determination as to the applicability of the "other 
insurance" clause in the Assurance policy "must await the jury's 
decision as to whether coverage under the builder's risk policy 
No. 
  2014AP821 
16 
was still in effect at the time of the fire."  Id., ¶13.  
Fontana filed a petition for review, which this court denied on 
April 23, 2012. 
¶31 After the case returned to the Walworth County Circuit 
Court, AnchorBank filed a motion to intervene under Wis. Stat. 
§ 803.09(1).  AnchorBank asserted an interest in any insurance 
proceeds due from Assurance in light of a foreclosure default 
judgment for $1,135,332.90, plus interest, that AnchorBank had 
recently obtained against Fontana.  The circuit court granted 
the motion to intervene and later granted partial summary 
judgment to AnchorBank, concluding that "[i]f, and only if, 
Assurance Company of America pays or is required to pay 
insurance proceeds in connection with this lawsuit, then, in 
that event, the insurance proceeds shall be used to restore or 
repair the property at issue in this lawsuit or paid to 
AnchorBank." 
¶32 The circuit court11 conducted a new trial to determine 
whether the Accolas' Chubb policy terminated Fontana's builder's 
risk policy from Assurance because permanent property insurance 
applied to the Lake Geneva home.  Over Fontana's objection, the 
circuit court allowed the admission of evidence related to the 
Accolas' negotiated settlement with Chubb.  Fontana argued that 
Wis. Stat. § 904.08 barred evidence pertaining to the Chubb 
settlement.  The circuit court, however, determined that the 
                                                 
11 Phillip A. Koss, Judge. 
No. 
  2014AP821 
17 
directive from the court of appeals——that "[t]he circuit court 
may not preclude the jury from considering the Chubb policy or 
any other extrinsic evidence that is relevant to Section E.3 of 
the policy," Fontana I, unpublished slip op., ¶11——contemplated 
admission of the settlement evidence. 
¶33 At trial, the special verdict form presented two 
questions to the jury: (1) "Was the policy of insurance issued 
by Chubb/Pacific Indemnity to James Accola and Suzy Accola 
permanent property insurance?"; and (2) "Did the policy of 
insurance issued by Chubb/Pacific Indemnity to James Accola and 
Suzy Accola apply to the fire loss?"  Before deliberations, the 
court instructed the jury as to the meaning of various terms 
necessary to interpret the policy: 
For the purposes of determining your answers to 
Questions 1 and 2, you are instructed that "permanent" 
means "continuing or enduring without marked change in 
status or condition or place." 
You 
are 
further 
instructed 
that 
the 
term 
"applies" 
means 
"to 
be 
pertinent, 
suitable, 
or 
relevant." 
An insurance company [sic] does not "apply" 
merely because it is bound, obtained or issued. 
Generally, 
a 
person 
cannot 
obtain 
insurance 
coverage unless they have an "insurable interest" to 
protect.  A party has an "insurable interest" in 
property if its destruction would subject it to a 
loss.  A party may have an "insurable interest" in 
property even if that party does not have title. 
The jury answered "yes" to both special verdict questions, with 
one juror dissenting as to the first question.  Because the 
jury's answers meant that the Assurance policy did not provide 
No. 
  2014AP821 
18 
coverage for Fontana's fire loss, the court did not try 
Fontana's bad faith claim. 
¶34 While the jury deliberated, the circuit court ruled on 
Assurance's argument that the "other insurance" clause in the 
builder's risk policy rendered the policy excess to the Accolas' 
Chubb policy.  Concluding that the "other insurance" clause did 
not apply, the court explained its reasoning from the bench: 
There are clearly two different insureds here.  
One is Fontana Builders.  That is on the Zurich or 
Assurance Company policy.  The Pacific Indemnity/Chubb 
policy covers different insureds, Jim and Suzy Accola. 
. . . . 
Frankly, Assurance was paid premiums to cover 
this 
loss. 
 
That's 
what 
they 
contracted 
with.  
[Accola] also contracted, at the requirement of 
AnchorBank, 
as 
a 
personal 
individual 
to 
get 
homeowner's 
insurance. 
 
They 
are 
not 
the 
same 
insureds.  They do not cover the same loss because 
until the keys are turned over, as the plaintiff has 
said, it's not their home.  It clearly could cover a 
structure, at some point.  Time of closing, keys are 
turned over. 
. . . . 
Therefore, 
the 
"other 
insurance" 
clause 
is 
inapplicable because "other insurance" clauses apply 
only when the "other insurance" "covers the same 
property and interest against the same risk in favor 
of the same party."  And there I'm citing from 44 
Am.Jur. 2d on Insurance, Section 1273, Identity of 
Interest. 
No. 
  2014AP821 
19 
Frankly, the Chubb policy covers the Accolas' 
personal property that was lost in the fire.  The 
Assurance policy covers the building itself.[12] 
The fact that Mr. Accola chose to reinvest in the 
property is what I find the facts to be, or in the 
corporation, by paying off its debt to Fontana 
Builders. 
"The evils which [the] 'other insurance' clauses 
are designed to prevent are not present where each 
policy insures only the interest held by each separate 
owner of an insurable interest in the property." 
Because of this, the "other insurance" defense 
should, in my opinion, fail. 
(Emphasis added.) 
¶35 Fontana and AnchorBank both appealed from the jury 
verdict.  Fontana Builders, Inc. v. Assurance Co. of Am. 
(Fontana II), No. 2014AP821, unpublished slip op. (Wis. Ct. App. 
Apr. 1, 2015) (per curiam).  The court of appeals affirmed, 
observing that, "[o]n remand, the trial court did precisely as 
we directed.  It permitted the jury to consider the Chubb 
policy, payments made pursuant to it, and extrinsic evidence 
relevant to Section E.3."  Id., ¶8.  Based on the evidence, the 
court of appeals saw no reason to disturb the jury's verdict 
because "the jury reasonably could have found that the Chubb 
policy was 'permanent' and 'applied,' thus terminating Fontana's 
coverage under the Assurance builder's risk policy."  Id., ¶¶7-
9.  Furthermore, the circuit court's decision to admit evidence 
                                                 
12 See infra ¶62 for our clarification of the distinct 
interests insured by Fontana's Assurance policy and the Accolas' 
Chubb policy, respectively. 
No. 
  2014AP821 
20 
pertaining to the Chubb settlement did not violate Wis. Stat. 
§ 904.08 because "evidence regarding the Chubb policy, the 
prompt adjustment activity, the substantial payments made, and 
the nature of those payments was not admitted in the context of 
settlement discussions."  Id., ¶10. 
¶36 On 
May 
14, 
2015, 
Fontana 
and 
AnchorBank 
filed 
petitions for review.  We granted both petitions on September 9, 
2015. 
III.  STANDARD OF REVIEW 
¶37 We 
rely 
on 
well-established 
principles 
when 
interpreting an insurance policy: 
The interpretation of an insurance contract is a 
question of law subject to de novo review.  An 
insurance policy is construed to give effect to the 
intent of the parties, expressed in the language of 
the policy itself, which we interpret as a reasonable 
person in the position of the insured would understand 
it.  The words of an insurance policy are given their 
common and ordinary meaning.  Where the language of 
the policy is plain and unambiguous, we enforce it as 
written, without resort to rules of construction or 
principles in case law. . . .  Contract language is 
considered ambiguous if it is susceptible to more than 
one reasonable interpretation.  If the language is 
ambiguous, it is construed in favor of coverage.  In 
interpreting an insurance policy, the court may also 
consider the purpose and subject matter of the 
insurance. 
Danbeck v. Am. Fam. Mut. Ins. Co., 2001 WI 91, ¶10, 245 
Wis. 2d 186, 629 N.W.2d 150 (citations omitted). 
¶38 This court consistently states that interpretation of 
an insurance contract is a question of law that we review de 
novo.  Schinner v. Gundrum, 2013 WI 71, ¶35, 349 Wis. 2d 529, 
No. 
  2014AP821 
21 
833 N.W.2d 685; Farmers Auto. Ins. Ass'n v. Union Pac. Ry. Co., 
2009 WI 73, ¶30, 319 Wis. 2d 52, 768 N.W.2d 596; Plastics Eng'g 
Co. v. Liberty Mut. Ins. Co., 2009 WI 13, ¶27, 315 Wis. 2d 556, 
759 N.W.2d 613; Doyle v. Engelke, 219 Wis. 2d 277, 283-84, 580 
N.W.2d 245 (1998); Cardinal v. Leader Nat'l Ins. Co., 166 
Wis. 2d 375, 382, 480 N.W.2d 1 (1992); Katze v. Randolph & Scott 
Mut. Fire Ins. Co., 116 Wis. 2d 206, 212, 341 N.W.2d 689 (1984) 
(first citing Westerman v. Richardson, 43 Wis. 2d 587, 591, 168 
N.W.2d 851 (1969); then citing Rabinovitz v. Travelers Ins. Co., 
11 Wis. 2d 545, 549, 105 N.W.2d 807 (1960); then citing Thurston 
v. Burnett & Beaver Dam Farmers' Mut. Fire Ins. Co., 98 
Wis. 476, 478, 74 N.W. 131 (1898); and then citing Ganson v. 
Madigan, 15 Wis. 158 (*144) (1862)); see Preisler v. Gen. Cas. 
Ins. Co., 2014 WI 135, ¶17, 360 Wis. 2d 129, 857 N.W.2d 136; 
Blasing v. Zurich Am. Ins. Co., 2014 WI 73, ¶20, 356 Wis. 2d 63, 
850 N.W.2d 138. 
¶39 On the first appeal in this case, the court of appeals 
articulated an exception to that general rule: "While the 
interpretation of a contract is normally a matter of law for the 
court to decide, when the words or terms in the contract must be 
construed using extrinsic evidence, the question is one for the 
trier of fact."  Fontana I, unpublished slip op., ¶8.  Applying 
the exception, the court of appeals explained that, "[g]iven the 
policy language, and the dispute over its application to the 
extremely unique facts presented here, the issue of whether the 
builder's 
risk 
policy 
ended 
because 
'permanent 
property 
No. 
  2014AP821 
22 
insurance applies' . . . is not a question of law for the court, 
but rather a question of fact for the jury."  Id., ¶10. 
¶40 Our standard of appellate review in this case turns 
upon the proper allocation of responsibility for interpreting 
the "permanent property insurance" condition in the Assurance 
policy.  As stated above, if interpretation of the Assurance 
policy presents a question of law, then we conduct a de novo 
review.  If, however, interpretation of the Assurance policy is 
properly a question of fact, then we will sustain the jury's 
verdict if there is any credible evidence to support it.  Morden 
v. Continental AG, 2000 WI 51, ¶38, 235 Wis. 2d 325, 611 
N.W.2d 659.   
¶41 We conclude that the court of appeals in this case 
misapplied the extrinsic evidence rule by allowing the jury to 
resolve the dispute over the proper application of the Assurance 
policy's language to the facts. 
¶42 As support for the extrinsic evidence exception, the 
court of appeals relied on its own decision in Central Auto, in 
which it stated, "Construction of a written contract is normally 
a matter of law for the court, but where words or terms are to 
be construed by extrinsic evidence, the question is one for the 
trier of fact."  Central Auto, 87 Wis. 2d at 19.  Central Auto 
involved interpretation of a lease, rather than an insurance 
policy.  Id. at 18-20 (holding that jury should have received 
evidence from parties' lease negotiations to determine intended 
meaning of term "bookstore" in the lease).  The Central Auto 
court cited Pleasure Time, Inc. v. Kuss, 78 Wis. 2d 373, 379, 
No. 
  2014AP821 
23 
254 N.W.2d 463 (1977), in which this court approved of a finder 
of fact interpreting a land contract by considering parties' 
testimony and drafts of the contract.  Pleasure Time, 78 
Wis. 2d at 379-80. 
¶43 Notably, both Central Auto and Pleasure Time involved 
extrinsic evidence used to ascertain the parties' understandings 
of the contracts' terms at the time the parties entered into the 
agreements.  Allowing the jury to resolve factual disputes about 
contract formation is consistent with the contract principle 
that "whether both parties agreed to be bound" by a contract is 
a question of fact.  5 Margaret N. Kniffin, Corbin on Contracts 
§ 24.30, at 326 (Joseph M. Perillo ed., rev. ed. 1998).  
However, the parties' respective understandings at the time they 
entered into a contract present a different question from the 
application 
of 
a 
contract 
to 
a 
given 
set 
of 
facts: 
"Determination of the legal operation of a contract . . . after 
the meaning of its language has been determined by process of 
interpretation, is always for the court, because legal operation 
is the result of applying rules of law to the facts."  Id. at 
338-39 (footnote omitted). 
¶44 Because insurance policies are contracts, "[w]ords and 
phrases in insurance contracts are subject to the same rules of 
construction that apply to contracts generally."  Frost ex rel. 
Anderson v. Whitbeck, 2002 WI 129, ¶15, 257 Wis. 2d 80, 654 
N.W.2d 225.  In various insurance cases, this court has 
mentioned the extrinsic evidence rule applied by the court of 
appeals in this case: "The construction of an insurance policy 
No. 
  2014AP821 
24 
is generally a matter of law for the court, although in a case 
of ambiguity where words or terms are to be construed by 
extrinsic evidence, the question is one for the fact-finder."  
Kraemer Bros., Inc. v. U.S. Fire Ins. Co., 89 Wis. 2d 555, 561-
62, 278 N.W.2d 857 (1979); see also Frost, 257 Wis. 2d 80, ¶5; 
Maas ex rel. Grant v. Ziegler, 172 Wis. 2d 70, 79, 492 
N.W.2d 621 (1992); Lambert v. Wrensch, 135 Wis. 2d 105, 115 n.8, 
399 
N.W.2d 369 
(1987); 
RTE 
Corp. 
v. 
Md. 
Cas. 
Co., 
74 
Wis. 2d 614, 620-21, 247 N.W.2d 171 (1976); Bauman v. Midland 
Union Ins. Co., 261 Wis. 449, 451-52, 53 N.W.2d 529 (1952); 
French v. Fid. & Cas. Co. of N.Y., 135 Wis. 259, 269, 115 N.W. 
869 (1908). 
¶45 Sweeping statements like the language in Kraemer Bros. 
seem to suggest that interpretation of an insurance policy's 
language is a question of fact for the jury any time that a 
dispute over policy language involves extrinsic evidence.  But 
careful examination of the extrinsic evidence rule's history in 
the insurance context demonstrates that, as in contracts cases 
like Central Auto and Pleasure Time, interpretation of an 
insurance contract becomes a question for the jury only when 
necessary to resolve factual disputes about the parties' 
understandings at the time they entered into the contract.13 
                                                 
13 Cf. Tower Ins. Co. v. Chang, 230 Wis. 2d 667,672, 601 
N.W.2d 848 (Ct. App. 1999) ("There is no dispute about what the 
girls did.  The question is whether their actions were for a 
church activity or activity performed on behalf of the church, 
within the meaning of the policy.  Whether their actions come 
(continued) 
No. 
  2014AP821 
25 
¶46 This court explained the rule's background in Kraemer 
Bros.: 
The construction of an insurance policy is 
generally a matter of law for the court, although in a 
case of ambiguity where words or terms are to be 
construed by extrinsic evidence, the question is one 
for the fact-finder.  The rule stated in Thurston v. 
Burnett & Beaver Dam Farmers' Mut. Fire Ins. Co., 98 
Wis. 476, 478, 479, 74 N.W. 131 (1898), was recently 
quoted with approval in RTE Corp. v. Maryland Casualty 
Co., 74 Wis. 2d 614, 621, 247 N.W.2d 171 (1976): 
"'. . . The case comes clearly within the rule 
that where language is plain and unambiguous, the 
apparent import of the words must govern, and the rule 
that where there is no uncertainty as to the meaning 
of the words used in the contract, and where such 
uncertainty exists but there is no extrinsic evidence 
or 
circumstance 
bearing 
on 
the 
subject 
to 
be 
considered in determining the meaning attributed to 
them by the parties when the contract was made, the 
proper interpretation of the words and construction of 
the contract are solely for the court.'" 
See also Pleasure Time, Inc. v. Kuss, 78 Wis. 2d 373, 
379, 254 N.W.2d 463 (1977). 
Kraemer Bros., 89 Wis. 2d at 561-62 (emphasis added).   
¶47 In Bauman, the court quoted the same language from 
Thurston, as well as a concluding sentence, "Therefore the trial 
court erred in leaving the construction of the contract to the 
jury."  Bauman, 261 Wis. at 452 (quoting Thurston, 98 Wis. at 
479). 
¶48 Despite the broad phrasing of the rule in Kraemer 
Bros., the case law at the foundation of the court's statement 
                                                                                                                                                             
under this umbrella is a matter of contractual construction 
requiring de novo review." (emphasis added)). 
No. 
  2014AP821 
26 
indicates that interpretation of a contract——insurance or 
otherwise——creates a question of fact for the jury only when 
extrinsic evidence illuminates the parties' understandings at 
the time they entered into the agreement.  See Thurston, 98 Wis. 
at 478-79.  Furthermore, neither Kraemer Bros. nor RTE Corp. nor 
Bauman nor Thurston involved extrinsic evidence; interpretation 
of the insurance contracts remained squarely a matter of law for 
the court.  Kraemer Bros., 89 Wis. 2d at 562; RTE Corp., 74 
Wis. 2d at 621; Bauman, 261 Wis. at 451-52; Thurston, 98 Wis. at 
478-79.  Thus, where a dispute turns upon application of an 
insurance policy to underlying facts, interpretation of the 
insurance policy presents a question of law for the court. 
¶49 In this case, a determination as to whether "permanent 
property insurance applie[d]" was not an appropriate question 
for the jury.  Assurance and Fontana do not argue that extrinsic 
evidence explains their respective understandings of the phrase 
"permanent 
property 
insurance 
applies" 
at 
the 
time 
that 
Assurance issued the policy.  Rather, they dispute whether the 
Chubb policy constituted permanent property insurance that 
applied so as to terminate Fontana's builder's risk coverage.  
In other words, they disagree as to whether the Assurance policy 
applies as a matter of law to the underlying facts.  Because 
resolving that dispute requires interpretation of the Assurance 
policy and application of the policy to the facts, we now 
conduct a de novo review of the policy. 
IV.  INTERPRETING THE ASSURANCE POLICY 
No. 
  2014AP821 
27 
¶50 This court has set forth a three-step analysis for 
determining whether an insurance policy provides coverage.  
Acuity v. Chartis Specialty Ins. Co., 2015 WI 28, ¶28, 361 
Wis. 2d 396, 861 N.W.2d 533; Preisler, 360 Wis. 2d 129, ¶22; Am. 
Fam. Mut. Ins. Co. v. Am. Girl, Inc., 2004 WI 2, ¶24, 268 
Wis. 2d 16, 673 N.W.2d 65.  First, the court examines the facts 
to determine whether the insuring agreement provides an initial 
grant of coverage, and the analysis ends if the policy does not 
provide an initial grant.  Preisler, 360 Wis. 2d 129, ¶22.  
Second, if the policy initially grants coverage, the court then 
considers the exclusions to determine whether any of them 
preclude coverage.  Am. Girl, 268 Wis. 2d 16, ¶24.  Finally, if 
an 
exclusion 
applies, 
the 
court 
determines 
whether 
any 
exceptions to the exclusion reinstate coverage.  Acuity, 361 
Wis. 2d 396, ¶28. 
¶51 Assurance has not argued in this court that any of the 
exclusions apply, so our analysis focuses on determining whether 
the policy provides an initial coverage grant.  The provision at 
issue here appears in Subsection E.3 of the policy.  Section E's 
heading is "Additional Conditions," and subsection 3's heading 
is "When Coverage Begins and Ends."  Subsection 3 provides that 
"[c]overage will end at the earliest of the following" and goes 
on to list the various termination circumstances quoted above, 
see supra ¶13, including "[w]hen permanent property insurance 
applies."  Rather than excluding otherwise available coverage 
based on the nature of the loss, the condition, if given effect, 
would completely terminate coverage of the risk, meaning the 
No. 
  2014AP821 
28 
policy would not provide an initial grant of coverage at all.  
Because the coverage provisions in the builder's risk policy 
would normally provide coverage for a fire loss, whether the 
policy provides an initial grant of coverage turns upon whether 
"permanent property insurance applie[d]" so as to terminate 
coverage. 
¶52 The Assurance policy does not define "permanent 
property insurance."  Nor does the policy define what it means 
for 
permanent 
property 
insurance——whatever 
it 
may 
be——to 
"apply."  Assurance contends that Chubb's payments to the 
Accolas demonstrate that permanent property insurance applied to 
the fire loss, thus terminating the Assurance policy.  Fontana 
counters that its insurable interest as a builder was distinct 
from 
the 
Accolas' 
interests 
as 
occupiers 
and 
potential 
purchasers.  Along with AnchorBank, Fontana emphasizes that 
allowing third-party potential purchasers like the Accolas to 
unilaterally 
terminate 
the 
Assurance 
policy 
by 
acquiring 
homeowner's insurance would be inconsistent with Fontana's 
reasonable expectations as an insured. 
¶53 Policy language is ambiguous when "susceptible to more 
than one reasonable construction."  Wadzinski v. Auto-Owners 
Ins. Co., 2012 WI 75, ¶11, 342 Wis. 2d 311, 818 N.W.2d 819 
(quoting Stubbe v. Guidant Mut. Ins. Co., 2002 WI App 203, ¶8, 
257 Wis. 2d 401, 651 N.W.2d 318).  "Where an ambiguity exists in 
a grant of coverage, we will construe the policy against the 
drafter, and in favor of the reasonable expectations of the 
insured."  Id. (citing Folkman v. Quamme, 2003 WI 116, ¶¶16-17, 
No. 
  2014AP821 
29 
264 Wis. 2d 617, 665 N.W.2d 857); see also Burgraff v. Menard, 
Inc., 2016 WI 11, ¶22, 367 Wis. 2d 50, 875 N.W.2d 596; Acuity v. 
Chartis 
Specialty 
Ins. 
Co., 
2015 
WI 
28, 
¶¶24-25, 
361 
Wis. 2d 396, 861 N.W.2d 533; Wilson Mut. Ins. Co. v. Falk, 2014 
WI 136, ¶¶23-24, 360 Wis. 2d 67, 857 N.W.2d 156; Hirschhorn v. 
Auto-Owners Ins. Co., 2012 WI 20, ¶23, 338 Wis. 2d 761, 809 
N.W.2d 529; Froedtert Mem'l Lutheran Hosp., Inc. v. Nat'l States 
Ins. Co., 2009 WI 33, ¶41, 317 Wis. 2d 54, 765 N.W.2d 251; State 
Farm Mut. Auto. Ins. Co. v. Bailey, 2007 WI 90, ¶22, 302 
Wis. 2d 409, 734 N.W.2d 386. 
¶54 Read in isolation, the phrase "when permanent property 
insurance applies" seems to present an ambiguity.  The policy 
provides no explicit guidance as to the meaning of the term 
"applies."  To whom or to what must permanent property insurance 
apply for coverage to end?  The provision is indefinite at best. 
¶55 Although mere disagreement among or between parties 
does not render policy language ambiguous, see Hirschhorn, 338 
Wis. 2d 761, ¶23, the parties' arguments in this case illustrate 
the ambiguity.  On the one hand, an insured builder might 
reasonably expect builder's risk coverage to end when the 
builder completes construction and the owner——be it the builder 
or a new owner——purchases a policy to provide adequate coverage 
for the finished structure.  On the other hand, a party might 
conclude that it is reasonable for builder's risk coverage to 
end when any other property insurance applies to the property, 
regardless of the party purchasing coverage or the particular 
interest insured. 
No. 
  2014AP821 
30 
¶56 For guidance interpreting the phrase "when permanent 
property insurance applies," we expand the analysis to consider 
the phrase within the context in which it appears.  "A term that 
is potentially ambiguous when read in isolation may be clarified 
by reference to the policy as a whole, and we will, therefore, 
examine the effect of individual terms within the context of the 
entire policy when resolving claimed ambiguities."  Wadzinski, 
342 Wis. 2d 311, ¶16 (citing Blum v. 1st Auto & Cas. Ins. Co., 
2010 WI 78, ¶20, 326 Wis. 2d 729, 786 N.W.2d 78). 
¶57 Considering 
the 
phrase 
"when 
permanent 
property 
insurance applies" in context suggests that the phrase speaks to 
the builder's interest in the property.  As discussed above, the 
phrase appears within a section delineating circumstances under 
which the policy terminates.  See supra ¶¶13, 51.  Of the seven 
circumstances giving rise to termination, five obviously pertain 
to changes in the builder's interest in the property: cessation 
of the builder's interest, sustained occupancy of the structure, 
rental or lease of the property, abandonment by the builder, and 
acceptance by the owner or buyer.  A sixth circumstance 
terminates 
the 
policy, 
absent 
renewal, 
when 
the 
builder 
maintains its interest over multiple years.  Collectively, these 
termination conditions end coverage upon a change in the 
builder's interest as initially insured under the policy. 
¶58 The 
circumstance 
at 
issue 
in 
this 
case——"when 
permanent property insurance applies"——is the only one that does 
not explicitly relate to the builder's interest in the property.  
Accordingly, based on its context, we read the phrase "when 
No. 
  2014AP821 
31 
permanent property insurance applies" as addressed to the 
builder's insured interest in the property.14  Hence, we examine 
the interests covered by the Assurance and Chubb policies to 
determine whether the existence of the Chubb policy terminates 
Fontana's coverage with Assurance. 
¶59 This court has explained the broad scope of insurable 
interests: 
A person need not have an absolute insurable right of 
property in the thing insured or even a special 
limited interest.  It is sufficient if a person's 
relationship 
to 
the 
property 
is 
such 
he 
would 
reasonably be expected to suffer a loss by the 
destruction of the property or to derive a benefit 
from its continued existence.  Neither a legal nor an 
                                                 
14 At the time of the fire, Fontana undeniably maintained 
its 
interest 
in 
the 
property 
in 
its 
capacity 
as 
the 
builder/owner.  As the concurrence/dissent observes, "Barbara R. 
Holden, the supervisor of builder's risk insurance underwriting 
at Assurance," testified during a deposition 
that builder's risk insurance covers "structures under 
construction, renovations, or additions" along with 
"materials that will be installed by the builder."  
Furthermore, a builder's risk policy is a temporary 
form of insurance that "ends once the construction is 
considered completed, as defined in the policy.  It is 
then up to the owner to obtain permanent property 
insurance on the newly constructed property." 
Concurrence/dissent, ¶93.  The concurrence/dissent acknowledges 
in the next paragraph, however, that at the time of the fire, 
"the Accolas had not yet closed on the home" and "construction 
was essentially [but not actually] completed."  Id., ¶94 
(emphasis added).  Because builder's risk coverage generally 
persists until construction ends, Fontana could reasonably 
expect that the builder's risk policy remained in place while 
construction of the home continued. 
No. 
  2014AP821 
32 
equitable interest nor any property interest as such 
in the subject matter is necessary. 
Ben-Hur Mfg. Co. v. Firemen's Ins. Co. of N.J., 18 Wis. 2d 259, 
262, 118 N.W.2d 159 (1962). 
¶60 As the court of appeals discussed in Society Insurance 
v. Capitol Indemnity Corp., 2003 WI App 61, 260 Wis. 2d 549, 659 
N.W.2d 875, 
distinct 
parties 
can 
have 
distinct 
insurable 
interests in a single property.  After a fire damaged a 
restaurant in Milwaukee, the restaurant operator who leased the 
building 
made 
a 
claim 
and 
received 
payment 
under 
his 
"businessowner's 
property 
and 
liability 
insurance" 
policy.  
Soc'y Ins., 260 Wis. 2d 549, ¶¶2-4.  The restaurant operator's 
insurer sought contribution from the insurer that provided a 
"Lessor's Risk" policy to the building's owner.  Id., ¶¶3-5.  
Emphasizing the distinction between the restaurant operator and 
the building's owner, as well as their separate interests in the 
property, the court of appeals denied contribution.  Id., ¶¶18, 
22.  Distinguishing an insurable interest "as owner" from an 
interest "as lessee/operator," the court of appeals explained 
that "[i]nterest . . . addresses how the insured is connected to 
the property——such as fee simple versus leasehold, or seller 
versus buyer versus builder."  Id., ¶¶15, 21 (citing St. Paul 
Fire & Marine Ins. Co. v. Protection Mut. Ins. Co., 607 F. Supp. 
388, 391 (S.D.N.Y. 1985)). 
¶61 Indeed, 
Couch 
on 
Insurance 
has 
highlighted 
circumstances under which a builder and a purchaser might have 
consequentially distinct insurable interests: 
No. 
  2014AP821 
33 
[A]n insurer under a builder's risk policy obtained by 
a contractor and an insurer under a fire policy 
obtained by a purchaser, who occupied the dwelling 
prior to conveyance of the title by the contractor, 
could not prorate a loss, though each policy contained 
pro rata clauses, because each policy covered a 
separate insurable interest. 
15 Steven Plitt, et al., Couch on Insurance, § 219:16, at 219-24 
(3d ed. 2005) (citing Peerless Ins. Co. v. Bailey Mortg. Co., 
345 F.2d 14 (5th Cir. 1965)). 
¶62 In this case, examination of the interests at issue 
stems from the pivotal difference between the Accolas and 
Fontana Builders, Inc., a closely held corporation.  This court 
recognizes that "the corporation is a separate entity and is 
treated as such under all ordinary circumstances."  Consumer's 
Co-op. of Walworth Cty. v. Olsen, 142 Wis. 2d 465, 474, 419 
N.W.2d 211 (1988) (quoting Milwaukee Toy Co. v. Indus. Comm'n of 
Wis., 203 Wis. 493, 495, 234 N.W. 748 (1931)).  Piercing the 
corporate veil is appropriate only when "applying the corporate 
fiction would accomplish some fraudulent purpose, operate as a 
constructive fraud, or defeat some strong equitable claim."  Id. 
at 475 (quoting Milwaukee Toy, 203 Wis. at 496).  The 
distinction between a corporation and its shareholders applies 
in the insurance context.  Stebane Nash Co. v. Campbellsport 
Mut. Ins. Co., 27 Wis. 2d 112, 121, 133 N.W.2d 737 (1965) 
(declining to adopt corporation's contention that it "was only a 
form of doing business and that the interest of the corporation 
and the [shareholders], the owners of the land, were one and the 
same and that there was a continuity of interest" where doing so 
No. 
  2014AP821 
34 
would "permit the corporation to assert the insurable interest 
that the [shareholders] had in the building"). 
¶63 At the second trial in this case, the circuit court 
reaffirmed that Fontana was a legal entity separate and distinct 
from its sole shareholder, James Accola.  Fontana had an 
interest in the Lake Geneva home as a builder and the property's 
owner.  To guard against risk of loss of that interest——of the 
building materials, the finished structure, and value added by 
the corporation's labor——Fontana sought and secured builder's 
risk 
insurance 
from 
Assurance. 
 
Separate 
from 
Fontana's 
interest, James and Suzy Accola had an interest in the property 
as occupiers and future purchasers.  As a prerequisite to 
completing the prospective purchase, and to guard against the 
risk of loss to their belongings already on the premises, the 
Accolas sought and secured homeowner's insurance from Chubb.  
Both Fontana and the Accolas acquired insurance protecting the 
property, but they were distinct legal entities insuring 
distinct interests in that property. 
¶64 Consequently, the Accolas' acquisition of the Chubb 
policy 
for 
their 
interest 
as 
occupants 
and 
prospective 
purchasers did not trigger the Assurance policy's termination 
provision because the Chubb policy did not apply to the same 
interest as the Assurance policy.  The Chubb policy in no way 
covered Fontana's interest as a builder and owner; therefore, it 
No. 
  2014AP821 
35 
did not "apply" so as to supersede the builder's risk coverage.15  
Furthermore, the Accolas' settlement with Chubb does not change 
the analysis because even if Chubb had acknowledged that the 
policy 
provided 
coverage——which 
the 
settlement 
expressly 
disclaimed——any payments to the Accolas would speak to their 
interest insured by Chubb rather than Fontana's interest insured 
by Assurance. 
¶65 Maintaining the legal distinction between Fontana and 
James 
Accola 
provides 
a 
crucial 
perspective 
for 
our 
interpretation.  Because Fontana and the Accolas are not legally 
coextensive, the Accolas' legal status relative to Fontana is 
                                                 
15 Because we conclude that the Chubb policy did not 
"apply," we need not determine whether it was "permanent 
property insurance." 
Our focus on whether the Chubb policy "applied," rather 
than on whether it was "permanent property insurance," also 
distinguishes this case from the only other available case 
interpreting a builder's risk policy provision that terminated 
coverage "when permanent property insurance applies."  The case 
comes from the United States District Court for the District of 
Rhode Island.  Indian Harbor Ins. Co. v. Assurance Co. of Am., 
No. CA 08-146 ML, 2010 WL 2365571 (D.R.I. May 21, 2010), 
recommendation adopted 2010 WL 2346654 (D.R.I. June 9, 2010).  
Assurance had issued a builder's risk policy to "Curanderismo, 
Inc." while the corporation renovated a building.  Id. at *4.  
Shortly after Assurance issued the policy, "Indian Harbor issued 
a 
Commercial 
Property 
Policy . . . to 
Mile 
Square 
Lofts, 
Curanderismo, Inc. as Trustee."  Id.  Curanderismo sought 
coverage under both policies after a portion of the building 
collapsed during the renovation.  Id. at *5.  Concluding that 
the phrase "permanent property insurance" was "not ambiguous," 
the court determined that the building "was insured under a 
policy of permanent property insurance prior to the Loss——thus 
terminating the Assurance policy prior to the Loss."  Id. at 
**5-6. 
No. 
  2014AP821 
36 
identical to that of any third party that might have sought to 
purchase a home from Fontana.  If the Accolas' acquisition of a 
homeowner's policy operated to terminate Fontana's builder's 
risk 
policy 
from 
Assurance, 
any 
third-party 
prospective 
purchaser acquiring a homeowner's policy in anticipation of 
closing a sale could similarly terminate a builder's risk policy 
containing this language. 
¶66 Empowering 
prospective 
purchasers 
to 
terminate 
a 
builder's 
insurance 
coverage——even 
without 
the 
builder's 
knowledge of the termination——would risk substantial mischief in 
the construction industry by undermining builders' reasonable 
expectations.  As amicus Wisconsin Bankers Association explained 
and testimony in this case bore out, it is standard practice for 
banks making loans to construction companies to require those 
companies to maintain builder's risk insurance throughout the 
construction process.  Testimony at the second trial also 
indicated that banks making loans to home purchasers generally 
require purchasers to obtain insurance on the property prior to 
any dispensation of loan funds.  Thus, any builder who procures 
a policy that terminates "when permanent property insurance 
applies" could face a time period near the end of construction 
in which the builder would have no insurance coverage for the 
property while a prospective purchaser prepares for closing——
even 
if 
construction 
on 
the 
property 
continues 
and 
the 
prospective sale ultimately fails to close. 
¶67 Leaving builders exposed to such uninsured risk of 
loss would thoroughly frustrate their reasonable expectations.  
No. 
  2014AP821 
37 
See Taylor v. Greatway Ins. Co., 2001 WI 93, ¶10, 245 
Wis. 2d 134, 628 N.W.2d 916 ("[I]nterpretation of language in an 
insurance 
policy 
should 
advance 
the 
insured's 
reasonable 
expectations of coverage.").  At the second trial, James Accola 
testified that he expected Fontana's coverage from Assurance 
would continue until Fontana transferred title to new owners, 
presumably 
James 
and 
Suzy 
Accola. 
 
Fontana 
continued 
construction on the premises even after the Accolas began to 
occupy the home, and Fontana never closed a sale to the Accolas.  
Like any third-party builder preparing arrangements with a 
prospective purchaser, Fontana could reasonably expect that its 
builder's risk coverage would persist while it remained the 
titled owner and finished construction on the property. 
¶68 Assurance, as the drafter of the policy, had the 
opportunity to set forth in clear terms the circumstances 
envisioned by the phrase "when permanent property insurance 
applies."  Absent unambiguous language to the contrary in a 
policy, we will not ask so much of builders as to require them 
reasonably to expect that their builder's risk coverage will 
terminate 
when 
third-party 
prospective 
purchasers 
procure 
property insurance without the builder's knowledge. 
V.  CONCLUSION 
¶69 Legally distinct entities had different interests in 
the Lake Geneva property at issue in this case.  Although the 
Accolas occupied the property on the date of the fire, their 
occupancy did not alter Fontana's insured interest: construction 
on the property continued, and Fontana remained the property's 
No. 
  2014AP821 
38 
owner because sale to the Accolas had not yet closed.  
Interpreting an ambiguous clause in an insurance policy to allow 
a third party to unilaterally terminate a builder's risk 
insurance policy without the insured builder's knowledge totally 
defeats the builder's reasonable expectation of coverage.  
Reaffirming the longstanding principle that interpretation of 
insurance contracts generally presents a question of law for the 
court, we conclude that the homeowner's policy issued by Chubb 
to the Accolas did not "apply" so as to terminate Fontana's 
builder's risk policy from Assurance.  Thus, we reverse the 
decision of the court of appeals and remand to the circuit court 
for a determination of Fontana and AnchorBank's remaining 
damages. 
 
By the Court.—The decision of the court of appeals is 
reversed, and the cause is remanded to the circuit court for 
further proceedings consistent with this opinion. 
 
 
No.  2014AP821.awb 
 
1 
 
¶70 ANN WALSH BRADLEY, J.   (concurring).  I agree with 
the majority that interpretation of the insurance polices at 
issue presents a question of law.  Majority op., ¶5.  I also 
agree that Fontana Builders, Inc. (Fontana) had a reasonable 
expectation that the builder's risk policy would persist while 
construction continued. 
¶71 Further, I share the majority's concern over potential 
purchasers being able to unilaterally terminate a builder's risk 
policy and agree that Fontana's builder's risk policy covered a 
different interest in the property than the Accolas' homeowner's 
policy from Chubb Insurance Co. (Chubb).  Id., ¶¶49, 66.   
¶72 We 
part 
ways, 
however, 
when 
it 
comes 
to 
the 
interpretation of the clause at issue.  The clause provides that 
Fontana's coverage will end "[w]hen permanent property insurance 
applies."  Like the concurrence/dissent, I conclude that in this 
clause the meaning of "applies" is not ambiguous and does not 
depend upon a contextual analysis of the policy's other 
termination provisions.  Concurrence/dissent, ¶89.  As the 
concurrence/dissent determines, I likewise determine that the 
word "applies" refers to the application of "permanent property 
insurance" to the property covered by the policy.  Id., ¶90. 
¶73 This conclusion begs the question of what property is 
covered by the Accolas' homeowner's policy.  A resolution of 
this question requires an examination of the Accolas' insurable 
interests. 
¶74 Under Wisconsin law, an individual must have an 
insurable interest in the property insured.  Stebane Nash Co. v. 
No.  2014AP821.awb 
 
2 
 
Campbellsport Mut. Ins. Co., 27 Wis. 2d 112, 118-19, 133 
N.W.2d 737 (1965).  Absent an insurable interest, an insurance 
contract is void as against public policy.  Id.; 3 Steven Plitt, 
et al., Couch on Insurance § 41:1, at 41-7 (3d ed. 2011).  Where 
there is no interest in the property, an insurance policy is 
merely a wagering agreement, "permit[ting] one man to profit by 
the losses of another."  Tischendorf v. Lynn Mut. Fire Ins. Co., 
190 Wis. 33, 39, 208 N.W. 917 (1926). 
¶75 One need not have legal title to a property in order 
to have an insurable interest.  Ben-Hur Mfg. Co. v. Firemen's 
Ins. Co. of N.J., 18 Wis. 2d 259, 262, 118 N.W.2d 159 (1962).  
The owner of an equitable title has an insurable interest.  "For 
example, an insurable interest may exist in a person who has 
purchased but not yet received title to the property." 3 Steven 
Plitt, et al., Couch on Insurance § 41:13, at 41-41-42.   
¶76 Further, although "[o]ccupancy alone is insufficient 
to establish an insurable interest in property," a tenant's 
expenditures for improvements could create an insurable interest 
in the building.  33-195 Appleman on Insurance Law and Practice 
§ 195.01 (2016).  Limited or qualified interests in property, 
whether legal or equitable, are sufficient to establish an 
insurable interest.  Id. 
¶77 However, where an insured has an insurable, but 
qualified or limited interest in the property, "he may not 
recover the full value [of the property] or an amount exceeding 
his actual interest in the res . . . the general rule is that 
the insured is limited in recovery to the value of his actual 
No.  2014AP821.awb 
 
3 
 
interest in the property insured."  Stebane Nash, 27 Wis. 2d at 
120 (quoting 3 Richards, Insurance § 503 at 1613 (5th ed.)); see 
also 33-195 Appleman on Insurance § 195.01. 
¶78 Unsurprisingly, this rule is echoed in the Accolas' 
homeowner policy from Chubb.  It provides: 
We will not pay for any loss to property in which you 
or a family member does not have an insurable interest 
at the time of the loss. 
If more than one person has an insurable interest in 
covered property, we will not pay for an amount 
greater than your interest, up to the amount of 
coverage that applies. 
In other words, the policy will not pay for a loss if there is 
no insurable interest in the covered property.  
¶79 Here, the record indicates that the Accolas' interests 
in the property were consistent with those of an occupier.  It 
is undisputed that the house was still being built, it had not 
been turned over unconditionally, and the Accolas did not have 
legal title to the property.  The court of appeals observed that 
the 
Accolas 
even 
maintained 
renters 
insurance. 
 
Fontana 
Builders, Inc. v. Assurance Co. of America, No. 2010AP2074, 
unpublished slip op., ¶11 n.3 (Wis. Ct. App. Dec. 7, 2011).  At 
the time of the fire, their relationship to the property was 
that 
of 
occupiers. 
 
Accordingly, 
the 
Accolas' 
insurable 
interests included their interest in the personal property they 
kept in the home and their interest in living expenses.   
¶80 Although the majority suggests that the Accolas' had 
an interest in the property as "future purchasers," I am not 
convinced.  Majority op., ¶63.  It is not asserted that the 
No.  2014AP821.awb 
 
4 
 
Accolas 
made 
substantial 
expenditures 
or 
improvements 
in 
reliance on purchasing the property.  Further, the majority 
correctly rejected the argument that the Accolas had other 
insurable 
interests 
in 
the 
property 
by 
virtue 
of 
their 
shareholder relationship with Fontana and the Accolas' interests 
as guarantors of Fontana's loans.  Nothing suggests that the 
Accolas had an interest in the property aside from their 
occupancy of it. 
¶81 The interests of a tenant are not the same as the 
interests of a landowner.  See Society Ins. v. Capitol Indem. 
Corp., 2003 WI App 61, 
¶¶19, 23, 260 
Wis. 2d 549, 659 
N.W.2d 875.  In this case, for example, the Accolas' did not 
have an interest in the building such that they would be 
responsible for its repair.  The building had not been completed 
by Fontana, it had not been purchased by Accola, and title had 
not been transferred.  Thus, the circuit court correctly 
concluded, "[the homeowner's policy and the builder's risk 
policy] did not cover the same loss because until the keys are 
turned over, as [Accola] has said, it is not their home."   
¶82 In sum, the Chubb policy could not cover the damage to 
the house's structure because the Accolas' lacked the requisite 
interest in it.  If the Chubb policy could not cover damage to 
the house's structure, it could not constitute "permanent 
property insurance [that] applies" to the covered property.  
Thus, the provision in the builder's risk policy terminating its 
coverage when "permanent property insurance applies," did not 
No.  2014AP821.awb 
 
5 
 
take effect and the builder's risk insurance was in effect when 
the fire damaged the house.   
¶83 For the reasons set forth above, I concur. 
¶84 I am authorized to state that Justice SHIRLEY S. 
ABRAHAMSON joins this concurrence. 
 
   
 
No.  2014AP821.rgb 
 
1 
 
¶85 REBECCA 
G. 
BRADLEY, 
J.   (concurring 
in 
part, 
dissenting in part).  I agree that interpretation of the 
insurance policies at issue presents a question of law for this 
court to decide; therefore, I join Part III of the majority 
opinion.  I respectfully dissent from Part IV of the majority 
opinion because the homeowner's policy in effect on the date of 
the loss constituted "permanent property insurance that applies" 
as that phrase is unambiguously used in the builder's risk 
policy.  Therefore, coverage under the builder's risk policy 
ended when the homeowner's policy took effect.  
¶86 This case involves two separate insurance policies:  
(1) a builder's risk policy issued by Assurance Company of 
America to Fontana Builders, Inc. and (2) a homeowner's policy 
issued by Chubb Insurance Company to James and Suzy Accola.  As 
the majority explains, interpretation of insurance policies 
presents a question of law for the court to decide.  Majority 
op., ¶38.  The majority also correctly explains that "whether 
the [builder's risk] policy provides an initial grant of 
coverage turns upon whether 'permanent property insurance 
applie[d]' so as to terminate coverage."  Id., ¶51.  To answer 
this question, I focus on the terms of the policies, interpret 
them as a reasonable person in the position of the insured 
would, and resolve any ambiguities in favor of coverage for the 
insured.  See Burgraff v. Menard, Inc., 2016 WI 11, ¶¶21-22, 367 
Wis. 2d 50, 875 N.W.2d 596. 
¶87 The builder's risk policy in effect at the time of 
loss took effect on April 19, 2007, although construction of the 
No.  2014AP821.rgb 
 
2 
 
home began in 2005 and Assurance issued an earlier insurance 
policy that year.  Although the new policy listed a one-year 
effective period, Section E.3 provides additional conditions 
governing both the beginning and the end of coverage.  At issue 
is Section E.3.f. in the builder's risk policy, which provides: 
E. Additional Conditions 
The following conditions apply in addition to the 
Commercial Inland Marine Conditions and the Common 
Policy Conditions: 
 . . .  
3. When Coverage Begins and Ends 
We will cover risk of loss from the time when you are 
legally responsible for the Covered Property on or 
after the effective date of this policy if all other 
conditions are met.  Coverage will end at the earliest 
of the following:    
 . . .  
f. When permanent property insurance applies . . .  
(second and third emphasis added).  As the majority indicates, 
the builder's risk policy does not define "permanent property 
insurance" nor does it define "applies."  Majority op., ¶52.  
This is not problematic, however, because the meaning of the 
phrase 
"when 
permanent 
property 
insurance 
applies" 
is 
unambiguous.   
¶88 The first question is whether homeowner's insurance 
may be considered "permanent property insurance" under the 
builder's risk policy.  A reasonable person purchasing insurance 
would understand that a homeowner's insurance policy constitutes 
"permanent 
property 
insurance." 
 
It 
is 
unnecessary 
to 
No.  2014AP821.rgb 
 
3 
 
specifically define the boundaries of "permanent property 
insurance" because homeowner's insurance reasonably falls within 
those boundaries.   
¶89 The second question is the meaning of "applies" as 
that word is used in section E.3.f. of the builder's risk 
policy. 
 
The 
majority 
opinion 
questions 
the 
clarity 
of 
"applies," majority op., ¶54, and ultimately concludes that 
"[t]he Chubb [homeowner's] policy in no way covered Fontana's 
interest as a builder and owner; therefore, it did not 'apply' 
so as to supersede the builder's risk coverage."  Majority op., 
¶64.  I disagree.  The meaning of "applies" is not ambiguous and 
does not depend upon an analysis of Fontana's interests.  
¶90 Section E.3. governs the beginning and end of coverage 
under the builder's risk policy for the "Covered Property."  It 
logically follows that the word "applies" within the phrase 
"[w]hen permanent property insurance applies" refers to the 
application of "permanent property insurance" to the property 
covered by the policy.  The builder's risk policy lists the 
location of the property: 1527 Muirfield Court in Lake Geneva, 
Wisconsin.  It also defines "Covered Property," in pertinent 
part, as: 
Property which has been installed, or is to be 
installed in any commercial structure and/or any 
single family dwelling, private garage, or other 
structures that will be used to service the single 
family dwelling at the location which you have 
reported to us.  This includes: 
(1) 
Your property; 
 . . . . 
No.  2014AP821.rgb 
 
4 
 
Under this definition, a reasonable insured would understand 
that the covered property is the home located at 1527 Muirfield 
Court.   
¶91 The majority concludes that the meaning of "applies" 
in the phrase "[w]hen permanent property insurance applies" is 
ambiguous because it could be interpreted to mean: (1) permanent 
property insurance acquired by the builder after completion of 
the structure or (2) permanent property insurance acquired by 
any third party, such as a prospective buyer, to cover the 
property.  See majority op., ¶55.  Merely because "permanent 
property insurance" could be procured by more than one type of 
insured 
does 
not 
render 
"applies" 
a 
term 
without 
an 
ascertainable meaning.  The insurance policy does not condition 
the end of coverage on the insured (here, the builder) obtaining 
the permanent property insurance.  Instead, permanent property 
insurance could be obtained by the builder at the completion of 
construction or by another interested party, such as the owner 
or prospective owner.  Under the unambiguous language of the 
builder's risk policy, the procurement of permanent property 
insurance 
covering 
the 
property 
ends 
coverage 
under 
the 
builder's risk policy.  The condition in the builder's risk 
policy ends coverage "when other permanent property insurance 
applies"——regardless of whether it is the insured under the 
builder's risk policy that obtains the permanent property 
insurance.   
¶92 The final question is whether the homeowner's policy 
(the permanent property insurance) applied to the home (the 
No.  2014AP821.rgb 
 
5 
 
covered property) at the time of the loss.  The answer is yes.  
The homeowner's policy insured the home located at 1527 
Muirfield Court in Lake Geneva, Wisconsin, which is the same 
home insured under the builder's risk policy.  As a result, 
coverage under the builder's risk policy ended when the 
homeowner's insurance took effect on June 21, 2007, prior to the 
loss. 
¶93 This interpretation is not only consistent with how a 
reasonable 
insured 
would 
read 
the 
builder's 
risk 
policy 
language, but also comports with the purpose of builder's risk 
insurance.  "A builders risk policy typically covers a structure 
under construction; materials, fixtures, supplies, machinery, 
and equipment to be used in the construction . . . ."  5 Jeffrey 
E. Thomas & Susan Randall, New Appleman on Insurance Law Library 
Edition § 50.01(1)(a) (2015).  This is exactly how Barbara R. 
Holden, the supervisor of builder's risk insurance underwriting 
at Assurance, explained Assurance builder's risk policies during 
her deposition in this case.  She testified that builder's risk 
insurance covers "structures under construction, renovations, or 
additions" along with "materials that will be installed by the 
builder."  Furthermore, a builder's risk policy is a temporary 
form of insurance that "ends once the construction is considered 
completed, as defined in the policy.  It is then up to the owner 
to obtain permanent property insurance on the newly constructed 
property."  Id.  Builder's risk "coverage generally extends 
until the placement of permanent property insurance to cover the 
No.  2014AP821.rgb 
 
6 
 
completed work."  4 Douglas L. Patin, Law and Prac. of Ins. 
Coverage Litig. § 45:25 (2015).   
¶94 That is precisely what happened here.  Assurance 
issued the builder's risk policy to Fontana Builders and 
AnchorBank on April 19, 2007.  That policy terminated when the 
prospective owners, the Accolas, obtained permanent property 
insurance on June 21, 2007 in the form of a homeowner's policy 
from Chubb Insurance Company.  Although the Accolas had not yet 
closed on the home prior to the loss, construction was 
essentially completed as evidenced by the fact that the Accolas 
were living in the home and had moved over $500,000 worth of 
personal property into the home.  These actions, along with the 
fact that they paid nearly $5,000 to obtain the homeowner's 
policy, indicate that the Accolas had every intention of 
completing the purchase of the home.   
¶95 Notably, as the majority opinion acknowledges, because 
a significant percentage of the home's construction was already 
completed at the time Fontana applied for a new builder's risk 
policy, Assurance would have declined to issue another builder's 
risk policy to Fontana, but for Assurance's data entry error 
during the underwriting process.  See majority op., ¶11 n.5.  A 
builder's risk policy is designed to cover a structure under 
construction.  It is not intended to insure a home occupied by a 
family and $500,000 worth of that family's personal property. 
¶96 The 
majority 
opinion 
raises 
the 
specter 
of 
"substantial 
mischief" 
in 
the 
construction 
industry 
if 
prospective purchasers could terminate a builder's risk policy.  
No.  2014AP821.rgb 
 
7 
 
Majority op., ¶66.  The majority opinion, however, ignores the 
fact that an insurance policy is a contract and a builder may 
negotiate and pay premiums for the risks the builder wishes to 
insure.  In this case, Fontana purchased a policy containing a 
number of conditions under which coverage would end, including 
not only "[w]hen permanent property insurance applies" but also 
"[n]inety days after initial occupancy of the Covered Property" 
among others.  To hold, as the majority does, that Fontana 
purchased a policy intending to maintain coverage overlapping 
with coverage obtained by the family occupying the home rewrites 
the Assurance policy and confers a benefit on Fontana for which 
it did not bargain. 
¶97 The majority opinion acknowledges that James Accola 
was the president and sole shareholder of Fontana,1 yet 
repeatedly insists Fontana had a reasonable expectation that 
coverage would persist under the builder's risk policy,2 despite 
the Accolas' procurement of the homeowner's policy concomitantly 
with their occupancy of the home.  The fact that the Accolas 
obtained coverage for the home under a homeowner's policy 
suggests exactly the opposite reasonable expectation on the part 
of Fontana——that the homeowner's policy would supplant the 
builder's risk policy because construction was substantially 
complete to the extent that the Accolas and over $500,000 of 
their property could occupy the home.  These unique facts belie 
                                                 
1 Majority op., ¶3. 
2 See majority op., ¶¶5, 58 n.14, 67. 
No.  2014AP821.rgb 
 
8 
 
any purported frustration of Fontana's reasonable expectations.  
That the homeowner's policy would succeed and not overlap with 
the builder's risk policy is indeed the only reasonable 
expectation Fontana could have had, unless it (or the Accolas) 
intended a different sort of "substantial mischief." 
¶98 The majority's conclusion results in a "remand to the 
circuit court for a determination of Fontana and AnchorBank's 
remaining damages."  Majority op., ¶69.  This instruction could 
be read as an invitation to disregard the principle that 
"[t]here can be but one recovery" with respect to a loss.  See 
Ben-Hur Mfg. Co. v. Firemen's Ins. Co. of N.J., 18 Wis. 2d 259, 
266, 118 N.W.2d 159 (1962).  Stated differently, the majority's 
opinion could be read as allowing two recoveries for the same 
loss——namely damage to the home on Muirfield Court.  This is 
precisely what our decision in Ben-Hur prohibited.  Id.   
¶99 In Ben-Hur, a fire damaged property manufactured by 
Ben-Hur 
Manufacturing 
Company 
that 
it 
housed 
in 
its 
distributor's warehouse.  Id. at 260.  Ben-Hur had a policy with 
American Church & Home Mutual Insurance Company while Firemen's 
Insurance Company of New Jersey insured the distributor.  Id.  
The question arose as to whether one or both policies covered 
the fire loss.  The answer turned on whether Ben-Hur, the 
distributor, or both parties had an insurable interest in the 
damaged property.  Id. at 263, 265-66.  We held that both Ben-
Hur and the distributor had different insurable interests in the 
damaged property.  Id. at 265.  Despite each party having its 
own insurable interest in the same property, we explained: "This 
No.  2014AP821.rgb 
 
9 
 
does not mean, of course, that both could have collected the 
full damage to the goods nor are they attempting to do so."  Id. 
at 266.  This principle applies here.   
¶100 The majority concludes the homeowner's policy did not 
"apply" to terminate the builder's risk policy "because Fontana 
and the Accolas insured different interests in the property." 
Majority op., ¶5.  As explained in Ben-Hur, the existence of 
separate insurable interests does not mean Fontana is entitled 
to indemnity under its builder's risk policy because the 
homeowner's insurer already paid for a substantial amount, if 
not all, of the damage to the home.  While Fontana had a 
separate insurable interest, on remand, Fontana cannot recover 
damages for a loss that has already been fully covered under the 
homeowner's policy procured by the Accolas. 
¶101 Unfortunately, 
the 
majority 
creates 
dangerous 
precedent by rewriting an insurance policy, ostensibly to 
protect a builder from losing coverage for the property before 
title passes to another.  The insurance policy for which Fontana 
bargained did not provide for such coverage and therefore the 
majority confers a benefit on Fontana for which Assurance has 
not been paid.  As a result, Fontana could receive a windfall 
payment from Assurance for a loss it did not suffer because the 
risk of that loss had already passed to another party; the 
Accolas have already been paid for the damage to the property 
despite their status as occupiers rather than owners at the time 
of the loss.  The unique facts of this case are unlikely to 
arise again unless a similar error in the underwriting process 
No.  2014AP821.rgb 
 
10 
 
results in the issuance of a builder's risk policy when 
construction is already substantially completed.  Nevertheless, 
the majority opinion incentivizes "substantial mischief" in the 
construction industry of a different sort than it fears by 
permitting a double recovery for but one loss. 
¶102 In sum, I agree with the majority that interpretation 
of the insurance policies at issue presents a question of law 
for this court to decide; therefore, I join Part III of the 
majority opinion.  
I do not agree with the majority's 
interpretation of the builder's risk policy; therefore, I 
respectfully dissent from Part IV of the majority opinion.  
Under the unambiguous terms of the builder's risk policy, the 
homeowner's policy in effect on the date of the loss constituted 
"permanent property insurance that applies."  Coverage under the 
builder's risk policy ended when coverage under the homeowner's 
policy took effect.  
No.  2014AP821.rgb 
 
 
 
1