Court Opinion

ID: 3218108
Source: CourtListenerOpinion
Date Created: 2016-06-29 13:23:04.940794+00
Date Added: 2024-06-11T14:30:35.535587
License: Public Domain

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 App. 2015 – Unpublished)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: BRADLEY,   R. G., J. concurs and dissents
  DISSENTED:           (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.
    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.

                                   2
                                                                     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-
                                                                  FILED
            Co-Appellant-Petitioner,
                                                             JUN 29, 2016
      v.
                                                                Diane M. Fremgen
                                                             Clerk of Supreme Court
Assurance Company of America,

            Defendant-Respondent.

      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

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.

                                              2
                                                                        No.        2014AP821

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

                                          3
                                                       No.   2014AP821

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.

                                  4
                                                                   No.         2014AP821

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

                                          5
                                                                   No.    2014AP821

$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.

                                           6
                                                                  No.       2014AP821

       ¶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 . . . [;]

             . . . .

                                           7
                                                                   No.     2014AP821

           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."

                                          8
                                                                        No.      2014AP821

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.

                                               9
                                                                     No.       2014AP821

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.

                                           10
                                                     No.   2014AP821

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.

                               11
                                                                        No.      2014AP821

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.

                                            12
                                                                        No.         2014AP821

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.

                                            13
                                                                      No.      2014AP821

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

                                           14
                                                                     No.     2014AP821

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

                                           15
                                                                           No.        2014AP821

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.

                                             16
                                                               No.      2014AP821

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

                                     17
                                                          No.    2014AP821

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.

                                    18
                                                             No.      2014AP821

           Frankly, the Chubb policy covers the Accolas'
      personal property that was lost in the fire.      The
                                                   [12]
      Assurance policy covers the building itself.

           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.

                                     19
                                                                     No.      2014AP821

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,

                                            20
                                                                   No.      2014AP821

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

                                          21
                                                            No.     2014AP821

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,

                                     22
                                                                       No.         2014AP821

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

                                             23
                                                                       No.    2014AP821

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)

                                           24
                                                           No.        2014AP821

    ¶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)).

                                    25
                                                                     No.      2014AP821

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

                                         26
                                                                     No.      2014AP821

     ¶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

                                          27
                                                                          No.         2014AP821

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,

                                           28
                                                                           No.     2014AP821

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.

                                             29
                                                                      No.      2014AP821

    ¶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

                                           30
                                                        No.     2014AP821

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.

                                    31
                                                                         No.      2014AP821

      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:

                                             32
                                                                  No.     2014AP821

       [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

                                      33
                                                                       No.        2014AP821

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

                                             34
                                                       No.    2014AP821

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.

                                    35
                                                                       No.      2014AP821

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.

                                         36
                                                                                  No.     2014AP821

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

                                                37
                                                                        No.         2014AP821

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.

                                            38
                                                               No.    2014AP821.awb

    ¶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.

                                       1
                                                                          No.    2014AP821.awb

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

                                             2
                                                                No.    2014AP821.awb

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

                                         3
                                                                              No.    2014AP821.awb

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

                                                 4
                                                        No.   2014AP821.awb

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.

                                     5
                                                                         No.   2014AP821.rgb

       ¶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

                                             1
                                                               No.   2014AP821.rgb

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

                                         2
                                                                      No.   2014AP821.rgb

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;

        . . . .

                                             3
                                                                             No.   2014AP821.rgb

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

                                               4
                                                                No.    2014AP821.rgb

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

                                         5
                                                                        No.    2014AP821.rgb

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.

                                           6
                                                                        No.   2014AP821.rgb

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.

                                            7
                                                                      No.    2014AP821.rgb

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

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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

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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.

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