Court Opinion

ID: 8204335
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:51:03.032608+00
Date Added: 2024-06-11T16:41:07.270502
License: Public Domain

REILLY, J.
¶ 43. (dissenting). I respectfully dissent. Pharmacal desired rhamnosus for one of its products, and Nebraska and Jeneil represented that they could supply it. Pharmacal ordered rhamnosus from Nebraska and Jeneil. Nebraska and Jeneil supplied Pharmacal with what they represented to be rhamnosus— but it was not, it was a different product called acidophilus. Pharmacal recalled its product and sued Nebraska and Jeneil for the damages related to the recall under the theory of breach of contract and various causes of action based on misrepresentation.
¶ 44. The majority misses the simple question presented: does a CGL policy provide coverage for claims based on misrepresentation? Twice our supreme court has decided that a misrepresentation is not an "accident" nor an "occurrence." See Stuart v. Weisflog's Showroom Gallery, Inc. (Stuart II), 2008 WI 86, *706¶¶ 31-32, 311 Wis. 2d 492, 753 N.W.2d 448; Everson v. Lorenz, 2005 WI 51, ¶¶ 19-20, 280 Wis. 2d 1, 695 N.W.2d 298. We are bound to follow these decisions. Cook v. Cook, 208 Wis. 2d 166, 189, 560 N.W.2d 246 (1997).
¶ 45. When determining the question of coverage we are to begin by looking to the four corners of the complaint. Estate of Sustache v. American Family Mut. Ins. Co., 2007 WI App 144, ¶ 19, 303 Wis. 2d 714, 735 N.W.2d 186. In this action, Pharmacal alleged the following substantive facts:
1. Pharmacal placed a purchase order for rhamnosus tablets.
2. Pharmacal relied on the certificates of analysis from Nebraska and Jeneil identifying the product that they were supplying as rhamnosus for, among other things, the labeling and representation of the finished product to be sold to a retailer.
3. Both the product sent by Nebraska and Jeneil and the finished product did not contain rhamnosus, they contained acidophilus.
4. The finished product was recalled because it contained acidophilus instead of rhamnosus.
¶ 46. Pursuant to the above facts, Pharmacal asserted various causes of action against Nebraska and Jeneil, including misrepresentation, intentional interference with contractual relationship, violation of Wis. Admin. Code § ATCP 90 (Feb. 2014), breach of contract, breach of duty of good faith and fair dealing, breach of implied warranty of merchantability, breach of implied warranty of fitness for particular purpose, and breach of express warranty under the Uniform Commercial Code. The allegations of misrepresentation underlay all of the claims.
*707¶ 47. Both Stuart II and Everson involved factual scenarios akin to the fact situation present in this case. Both Stuart II and Everson involved an underlying contract action: the Stuarts entered into an architectural and remodeling contract, Stuart II, 311 Wis. 2d 492, ¶ 6, and the Eversons entered into a contract to purchase a vacant lot, Everson, 280 Wis. 2d 1, ¶ 4. In addition to breach of contract claims, both the Stuarts and Eversons lodged causes of action for "negligent" misrepresentations. Stuart II, 311 Wis. 2d 492, ¶ 7; Everson, 280 Wis. 2d 1, ¶ 5. The insurer for Weisflog's Showroom Gallery was named as a party to the suit and had a judgment entered against it after a jury found its insured liable for misrepresentation and negligence claims. Stuart II, 311 Wis. 2d 492, ¶¶ 7, 11, 13. The seller in Everson tendered the claims to his CGL insurer and argued that any damages incurred by his acts were the result of an unintended, unexpected, and accidental occurrence; i.e., any misrepresentations were not intentional but negligently made and, hence, covered by the CGL policy. Everson, 280 Wis. 2d 1, ¶¶ 6, 16.
¶ 48. The Stuart II court held that the meaning of "occurrence" and "accident" are both unambiguous. Stuart II, 311 Wis. 2d 492, ¶ 24. "Occurrence" is defined as an "accident," and "accident" is defined as "an event or condition occurring by chance or one that arises from unknown causes, and is unforeseen and unintended." Id. Accordingly, both Stuart II and Everson held that misrepresentations — strict responsibility and/or negligent representations in the case of Everson and ATCP misrepresentations in the case of Stuart II — were not accidental occurrences. Stuart II, 311 Wis. 2d 492, ¶ 27; Everson, 280 Wis. 2d 1, ¶¶ 18-20. The bases for the court's decision in Stuart II and Everson were the same: "a volitional misrepresentation could not be considered *708an accident for purposes of coverage." Stuart II, 311 Wis. 2d 492, ¶¶ 30, 32. Misrepresentation is not an accident (and hence not an occurrence) as "a false assertion 'requires a degree of volition inconsistent with the term accident'" and "where there is a volitional act involved in such a misrepresentation, that act removes it from coverage as an 'occurrence' under the [CGL] policy." Id., ¶ 32 (quoting Everson, 280 Wis. 2d 1, ¶¶ 19-20).
¶ 49. The same principle applies here. The false assertions of Nebraska and Jeneil to Pharmacal reflect a degree of volition (that the product was rhamnosus) rendering the misrepresentations "along with the damage they caused" inapplicable for coverage as an accidental occurrence. See id. As the Stuart II court held, "[n] either case law nor common sense supports an interpretation of 'accidental occurrence' that would include misrepresentations volitionally made with the particular intent to induce." Id., ¶ 45. As the majority complicates what is not complicated and improperly rewrites a CGL policy into a performance bond, I respectfully dissent and would affirm the circuit court's dismissal of the insurers.