Opinion ID: 1238678
Heading Depth: 2
Heading Rank: 2

Heading: Everson and the Court of Appeals' Opinion in Stuart

Text: The parties' initial briefing and oral argument concentrated largely on the interplay between the Wisconsin Supreme Court's 2005 decision in Everson v. Lorenz, 2005 WI 51, 280 Wis.2d 1, 695 N.W.2d 298 (2005), and the Wisconsin Court of Appeals' decision the following year in Stuart v. Weisflog's Showroom Gallery, Inc., 2006 WI App 184, 296 Wis.2d 249, 722 N.W.2d 766 (2006). At issue in Everson was whether a commercial general liability policy provided coverage for claims of strict-responsibility and/or negligent misrepresentation. 2005 WI 51, ¶ 11, 280 Wis.2d 1, 695 N.W.2d 298. The plaintiffs, Paul and Michelle Everson, purchased a residential lot in a subdivision developed by the defendant, Richard Lorenz, unaware that their lot was within the boundary of a 100-year flood plain. Lorenz had provided the Eversons with a list of the lots partially within the flood plain, but the list erroneously designated lot 21 instead of lot 31 as among those affected. That is, lot 31  the parcel the Eversons purchased  was mistakenly designated as lot 21 on the list, making it appear that lot 31 was not in the flood plain. The Eversons sued Lorenz for strict responsibility and negligent misrepresentation. [4] Like the policies at issue here, Lorenz's insurance policy covered only losses caused by an occurrence, defined as an accident. The supreme court held that Lorenz's insurer was not obligated to defend the misrepresentation claims. Using the definition of accident we have set forth above, the court concluded that Lorenz's misrepresentation about the lot cannot be considered an `accident' for purposes of ... liability insurance coverage. Id. ¶ 18, 695 N.W.2d 298. The court noted that [t]o be liable, Lorenz must have asserted a false statement, and such an assertion requires a degree of volition inconsistent with the term accident. Although this assertion may be prompted by negligence, it is nevertheless devoid of any suggestion of accident. Id. ¶ 19, 695 N.W.2d 298 (citation omitted). Thus, the court viewed the degree of volition inherent in the making of a false factual statement as incompatible with the common understanding of the term accident. Accordingly, the court concluded that Lorenz's insurance policy did not cover the strict-responsibility and negligent misrepresentation claims asserted in the underlying complaint. Id. ¶¶ 19-20. This was so even though Lorenz did not intend to deceive the Eversons when he made the false statement but was merely alleged to have been negligent as to  or strictly responsible for  the statement's falsity. Id. ¶ 22, 695 N.W.2d 298. Everson scotches insurance coverage for most misrepresentation claims where the policy in question limits coverage to losses caused by occurrences, meaning accidents  as many liability policies do. Almost all cognizable claims of misrepresentation require a false statement of fact and therefore a degree of volition inconsistent with an accident under the rationale of Everson. [5] Indeed, the Goderstads agreed in the district court that based on Everson, the Ebertses' various misrepresentation claims against them were not covered. The district court accepted that concession and summarily disposed of the Goderstads' remaining argument  that the negligence claim was sufficient to trigger coverage  by dismissing that count for failure to state a claim. See supra note 3. The district court's decision, however, was issued before the Wisconsin Court of Appeals decided Stuart v. Weisflog's Showroom Gallery, Inc., 2006 WI App 184, 296 Wis.2d 249, 722 N.W.2d 766. Stuart involved the question of liability coverage for a loss incurred in connection with a claim for violation of a deceptive-practices regulation. The regulation in question, Wisconsin Administrative Code ATCP § 110.02(11), prohibits the making of any false, deceptive or misleading representation in order to induce any person to enter into a home improvement contract. The case involved a building contractor who was retained on a home remodeling project and was later sued by the homeowner for serious defects in the remodeling work. The court of appeals heard the case in two stages: one concerning issues on the merits, Stuart v. Weisflog's Showroom Gallery, Inc., 2006 WI App 109, 293 Wis.2d 668, 721 N.W.2d 127 (2006), and the other concerning insurance-coverage issues, Stuart v. Weisflog's Showroom Gallery, Inc., 2006 WI App 184, 296 Wis.2d 249, 722 N.W.2d 766 (2006). In the second stage, the court of appeals held that the contractor's insurer was obligated to indemnify the contractor under its commercial general liability policy, which  again, like the policies here  provided coverage for loss caused by an occurrence, defined as an accident. The court of appeals reasoned that because a misrepresentation in violation of ATCP § 110.02(11) did not require intent to defraud, the contractor's misrepresentation could be considered an accident for purposes of the insurer's indemnity obligation. Id. ¶ 33. The court also noted that § 100.18  the consumer-protection statute on which the Ebertses have premised one of their misrepresentation claims in this case  should be read in pari materia with the court's interpretation of ATCP § 110.02(11). Id. ¶ 28. On the strength of the court of appeals' decision in Stuart, the Goderstads asked the district court to reconsider its no-coverage decision. The court declined to do so, and this appeal ensued. In the meantime, however, the Wisconsin Supreme Court granted review in Stuart, and like the court of appeals, heard the case in two stages. See Stuart v. Weisflog's Showroom Gallery, Inc. (Stuart I), 2008 WI 22, 308 Wis.2d 103, 746 N.W.2d 762 (2008) (involving merits issues); Stuart v. Weisflog's Showroom Gallery, Inc. (Stuart II), 2008 WI 86, 311 Wis.2d 492, 308 Wis.2d 103, 753 N.W.2d 448 (2008) (involving coverage issues). But when the Goderstads argued their case in this court, Stuart II was still pending and awaiting decision in the supreme court. The Goderstads suggested that we certify this case to the supreme court pursuant to Circuit Rule 52, but we opted to hold it in abeyance and required the parties to file supplemental briefs after the supreme court released its decision in Stuart II. They have done so.