Opinion ID: 1278224
Heading Depth: 2
Heading Rank: 3

Heading: causation nexus

Text: ¶ 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 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 sellerinsured failed to disclose that information. The court of appeals held that the complaint sufficiently alleged a nexus 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 sellerinsured'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 forth herein, that under such circumstances, causation nexus is not sufficiently alleged. ¶ 38 In Qualman, the court of appeals held that the presale 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 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.