Court Opinion

ID: 8202547
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:39:16.722296+00
Date Added: 2024-06-11T16:40:56.493296
License: Public Domain

CALLOW, WILLIAM G., J.
(dissenting). The relevant insurance policies at issue generally provide that the insurers shall pay "all sums which the insured shall become legally obligated to pay as damages" (emphasis added). The term "damages" is left undefined by the insurance policies. The majority, therefore, applies "the common and ordinary meaning" of the term "damages" and concludes that the term, as used in a contract of insurance, encompasses the cost of complying with injunctive relief and attorney fees sought by an opposing party as part of the costs in the underlying litigation.
In the insurance context, the term "damages" has an accepted technical meaning in the law, which does *426not include the cost of complying with injunctive relief nor attorney fees sought by an opposing party as part of the costs of the underlying litigation. Accordingly, I dissent.
The standards for the construction of terms in insurance policies are well-established and have been stated by this court on several occasions:
Contracts of insurance are controlled by the same principles of law that are applicable to other contracts. A policy of insurance like any other contract is to be construed so as to give effect to the intention of the parties. In the case of an insurance contract, the words are to be construed in accordance with the principle that the test is not what the insurer intended the words to mean but what a reasonable person in the position of an insured would have understood the words to mean. Whatever ambiguity exists in a contract of insurance is resolved in favor of the insured.... Words or phrases in a contract are ambiguous when they are reasonably or fairly susceptible to more than one construction.
Caporali v. Washington Nat. Ins. Co., 102 Wis. 2d 669, 675-76, 307 N.W.2d 218 (1981) (quoting Garriquenc v. Love, 67 Wis. 2d 130, 134-35, 226 N.W.2d 414 (1975)). However, when the terms of the policy are unambiguous and plain on their face, the policy should not be rewritten to include insurance coverage not agreed to by the parties and for which it was not paid. Mercado v. Mitchell, 83 Wis. 2d 17, 25, 264 N.W.2d 532 (1978).
On past occasions, we have resorted to the dictionary for guidance in discerning the ordinary meaning of terms in a contract.1 However, in the insurance context, the term "damages" has an accepted technical meaning *427in law.2 Black's Law Dictionary (6th ed.) p. 389, defines "damages" as:
A pecuniary compensation or indemnity, which may be recovered in the courts by any person who has suffered loss, detriment, or injury, whether to his person, property, or rights, through the unlawful act of omission or negligence of another.
"Damages" as used in these insurance policies unambiguously means legal damages. It is legal compensation for past wrongs or injuries and is generally pecuniary in nature. The term "damages" does not encompass the cost of complying with injunctive relief.3
*428A noted authority on remedies explains that judicial remedies fall into four major categories: damages remedies, restitutionary remedies, coercive remedies (such as injunctions that are backed by the court's contempt power), and declaratory remedies. Dobbs, Handbook on the Law of Remedies, sec. 1.1 at 1 (1973). This classification scheme is based on the nature and purpose of the relief awarded. Id. at 2.
The damages award is substitutionary relief, that is, it gives the plaintiff money mainly by way of compensation, to make up for some loss, but one ordinarily may be measured in money. ... By way of contrast, specific remedies in law or equity, such as replevin and ejectment at law, or injunction or specific performance in equity, are not substitute remedies at all, but attempt to give the plaintiff the very thing to which he was entitled.
*429Dobbs, sec. 3.1 at 135 (footnotes omitted) (emphasis added). A classification based on the form of the action, as either equitable or legal, is irrelevant. Where the parties have contracted to limit recovery to a specific quantifiable type of remedy, a court should not alter the insurance contract to include other types of remedies not contracted for by the parties and that may not be presently quantifiable.
This limited construction of the term "damages" is consistent with the core distinction between damages and injunctive relief, which was explained in Pure Milk Prod. Coop. v. National Farmers Org. (Pure Milk II), 90 Wis. 2d 781, 280 N.W.2d 691 (1979). Pure Milk II involved the appropriateness of a permanent injunction to prevent the National Farmers Organization from attempting to induce members of Pure Milk Products Cooperative and Associated Milk Producers, Inc. to breach their membership and marketing agreements. In Pure Milk II, we explained:
[A]n injunction is designed to prevent injury, not to compensate for past wrongs, and that an injunction may issue merely upon proof of a sufficient threat of future irreparable injury.
Pure Milk II, 90 Wis. 2d at 802. An injunction looks to the future conduct of the parties and is preventive in nature. Damages, on the other hand, are remedial in nature, not preventive. The remedy of injunction is only available if the plaintiff can establish that a continuing or anticipated injurious act is not adequately compensa-ble in damages. Id. at 800. This is not to say that an injunction and damages cannot be sought or awarded in the same cause of action. They are merely alternative or concomitant remedies. Wussow v. Commercial Mechanisms, Inc., 97 Wis. 2d 136, 152, 293 N.W.2d 897 (1980).
*430The apparent goal of the plaintiffs in the underlying action was the desegregation of the Milwaukee area school system. The amended complaint sought only declaratory and injunctive relief whose purpose was "to eliminate the remaining vestiges of segregation in the school districts and schools in the Milwaukee metropolitan area." The amended complaint did not seek to presently compensate the victims of past discrimination. Therefore, no "damages" were sought in the underlying action.
The school districts argue and the majority concludes that the compensatory programs requested in the amended complaint were remedial in nature to compensate children for past inadequate education and, thus, should constitute "damages." In support of this position, they cite Milliken v. Bradley (Milliken II), 433 U.S. 267 (1977). In Milliken II, the United States Supreme Court held that in discrimination cases, a district court can order compensatory or remedial educational programs for schoolchildren who have been subjected to past acts of de jure segregation if the programs are guided by equitable principles. Milliken II, 433 U.S. at 279-80. Milliken II is cited for the proposition that, like damages, compensatory educational programs are intended to restore the victims of discriminatory conduct to the position they would have enjoyed had education been administered in a nondiscriminatory manner. See Milliken II, 433 U.S. at 282. However, Milliken II does not support the proposition for which it has been cited.
The Milliken II Court clearly explains that the remedial programs do not constitute damages:
The educational components, which the District Court ordered into effect prospectively, are plainly designed to wipe out continuing conditions of inequality. ... Unlike the award in Edelman, the injunc*431tion entered here could not instantaneously restore the victims of unlawful conduct to their rightful condition. Thus, the injunction here looks to the future, not simply to presently compensating victims for conduct and consequences completed in the past.
These programs were not, and as a practical matter could not be, intended to wipe the slate clean by one bold stroke, as could a retroactive award of money in Edelman.... That the programs are also "compensatory" in nature does not change the fact that they are part of a plan that operates prospectively to bring about the delayed benefits of a unitary school system.
Milliken II, 433 U.S. at 290 & n.21 (emphasis in original). Similar to the educational programs in Milliken II, the programs requested in the underlying amended complaint here concerned the future provision of education. The costs of compliance with an injunction cannot reasonably be regarded as a sum payable "as damages." Damages are legal recompense for injuries sustained. Therefore, the costs of programs designed to encourage the future provision of nondiscriminatory education may not have any relation with harm to specific third parties and cannot be considered "damages" as that term is used in the insurance policies.
It should be recognized, however, that even though the main purpose of damages is compensation, there are elements of damages that are not entirely compensatory. For example, punitive damages generally are sums awarded apart from compensatory damages, usually as punishment or deterrent levied because of particularly aggravated misconduct on the part of the defendant. The aggravated misconduct is so closely related to the loss that we have determined that punitive damages are covered by the "damages" qualifier within the insurance policy. See Brown v. Maxey, 124 Wis. 2d 424, 369 *432N.W.2d 677 (1985), and Cieslewicz v. Mutual Service Cos. Ins. Co., 84 Wis. 2d 91, 267 N.W.2d 595 (1978).
The limited construction of the term "damages" is also consistent with the basic grant of coverage in the insurance policies. The insurers agreed to pay "all sums which the insured shall become legally obligated to pay as damages." The insurers did not agree to pay "all sums which the insured shall become legally obligated to pay." The addition of "as damages" serves as a qualifier, a limit to coverage. The broad, expansive interpretation of "damages" proposed by Shorewood and Greenfield and adopted by the majority renders the phrase "as damages" mere surplusage because any expense incident to litigation is now covered by the policies. Ignoring the rules of construction that it quite adamantly claims to adhere to, the majority has rewritten the insurance contract by eliminating the qualifier "damages" and included coverage not agreed to by the parties and for which no premium was paid.
I agree that it is preferable to define important terms contained in a contract, especially a contract of insurance. However, a term is not ambiguous merely because the contract leaves the term undefined. I submit that even if the term "damages" was defined in the contract of insurance, this court would still be addressing the issue of whether costs of complying with injunctive relief and attorney fees sought by an opposing party constitute "damages" as that term is defined under the policy. Furthermore, most insureds probably would not even read the definition of "damages” that would become one of a myriad of definitions provided by the insurance policy.
The amended complaint in the underlying litigation also requested "an order pursuant to 42 U.S.C. sec. 1988 allowing plaintiffs their costs and reasonable attorneys' *433fees." The majority opinion at 423 concludes that "[t]he term 'damages,' according to its ordinary usage, includes all forms of civil liability, including attorney fees. Under the insurance policies, the school district had a reasonable expectation of recovering from the insurance carriers any attorney fees they became obligated to pay to an opposing party." I disagree.
The language of 42 U.S.C. sec. 1988 explicitly provides that "the court, in its discretion, may allow the prevailing party ... a reasonable attorney's fee as part of the costs." The insurers correctly point out that only one case has specifically interpreted this provision of 42 U.S.C. sec. 1988. In Board of County Commissioners of the County of Larimer v. Guarantee Ins. Co., 90 F.R.D. 405 (D. Colo. 1981), the county was a defendant in a civil rights action and sought indemnification from its insurer for the payment of attorney fees which were awarded pursuant to 42 U.S.C. sec. 1988. Similar to the present situation, the underlying complaint sought only declaratory and injunctive relief. The insurance policy provided coverage for "all sums which the insured shall become legally obligated to pay as damages because of injury." The Larimer court held that attorney fees "awarded and costs assessed are not damages as contemplated by the [insurance] policy definition or as understood by the term's ordinary customary meaning in civil rights actions." Larimer, 90 F.R.D. at 407.
The majority opinion relies upon City of Ypsilanti v. Appalachian Ins. Co., 547 F. Supp. 823 (E.D. Mich. 1982), aff'd, 725 F.2d 682 (6th Cir. 1983). The Ypsilanti court addressed the issue of whether the insurance company agreed in the contract of insurance to pay the award of attorney fees assessed against the City of Ypsilanti in the underlying litigation. It held that in a civil rights suit, attorney fees are a form of damage which the *434insurer contracted to cover. Ypsilanti, 547 F. Supp. at 828. The Ypsilanti court reasoned that attorney fees awarded in the underlying litigation do not constitute "costs" under the insurance policy because the definition of "costs" refers only to the expense of carrying on the defense of a lawsuit. It does not refer to sums for which the insured is found liable, such as an award of attorney fees. Id. at 827. The Ypsilanti court, therefore, concluded that by default such attorney fees must be considered "damages." However, Ypsilanti did not involve 42 U.S.C. sec. 1988, which expressly treats an award of attorney fees "as part of the costs."
In Hutto v. Finney, 437 U.S. 678 (1978), the United States Supreme Court explained the distinction between damages and attorney fees awarded as part of the costs under 42 U.S.C. sec. 1988. The Hutto Court recognized that only prospective injunctive relief can be awarded against a state, not retroactive relief such as damages. It then upheld an award of attorney fees against the state by distinguishing between damages and costs:
Unlike ordinary "retroactive" relief such as damages or restitution, an award of costs does not compensate the plaintiff for the injury that first brought him into court. Instead, the award reimburses him for a portion of the expenses he incurred in seeking prospective relief. (An award of costs will almost invariably be incidental to an award of prospective relief, for costs are generally awarded only to prevailing parties . . . and only prospective relief can be successfully pursued by an individual in a suit against a State.)
Hutto, 437 U.S. at 695 n.24.4 Therefore, an award of attorney fees under 42 U.S.C. sec. 1988 does not constitute "damages." The insurers did not have a duty to *435defend the school districts in the underlying action based solely on a request for attorney fees under 42 U.S.C. sec. 1988.
Similar to the attorney fees requested in the underlying amended complaint, the plaintiffs' attorney fees in the underlying litigation which the school districts voluntarily agreed to pay pursuant to the settlement agreement are costs of litigation and, therefore, do not constitute "damages." Furthermore, the insurance contracts at issue here exclude coverage for "liability assumed by the insured under any contract or agreement." Because the insurers did not participate in or consent to the settlement agreement, the insurers should have no duty to indemnify Shorewood and Greenfield for the attorney fees they agreed to pay pursuant to the settlement agreement.
For the reasons set forth, I conclude that the term "damages" as it is used in the insurance policies encompasses only legal damages as compensation for past wrongs. It does not include the costs of complying with injunctive relief nor does it include attorney fees that are sought by an opposing party as part of the costs of litigation. Accordingly, I dissent.
I am authorized to state that JUSTICES ROLAND B. Day and DONALD W. Steinmetz join in this dissenting opinion.

 See Caporali, 102 Wis. 2d at 676.

 See Fee v. Heritage Mut. Ins. Co., 17 Wis. 2d 364, 117 N.W.2d 269 (1962), overruled on other grounds by In Matter of Estate of Stromsted, 99 Wis. 2d 136, 144, 299 N.W.2d 226 (1980). In Fee, this court recognized that "damages" as that term is used in a contract of insurance has an accepted technical meaning in the law. Fee, 17 Wis. 2d at 366. Courts in many other jurisdictions as well have determined that in the insurance context "damages" has an accepted technical meaning in the law. Aetna Casualty & Surety Co. v. Hanna, 224 F.2d 499, 503 (5th Cir. 1955); Continental Ins. v. Northeastern Pharmaceutical, 842 F.2d 977, 985 (8th Cir. 1988); Cincinnati Ins. Co. v. Milliken and Co., 857 F.2d 979, 981 (4th Cir. 1988); Maryland Casualty Co. v. Armco, Inc., 822 F.2d 1348, 1352 (4th Cir. 1987); Ladd Const. Co. v. Ins. Co. of North America, 391 N.E.2d 568, 571 (Ill. App. 1979); Garden Sanctuary, Inc. v. Ins. Co. of North America, 292 So. 2d 75, 77 (Fla. App. 1974); CPS Chemical v. Continental Ins., 536 A.2d 311, 315 (N.J. Super. A.D. 1988); Travelers Ins. Co. v. Ross Electric of Washington, Inc., 685 F. Supp. 742, 745 (W.D. Wash. 1988); and Desrochers v. New York Cas. Co., 106 A.2d 196, 198 (N.H. 1954), among others.

 The majority defers to Webster's Third New International Dictionary for the "common and ordinary meaning" of the term "damages." "According to Webster's, 'damages' means 'the estimated reparation in money for detriment or injury sustained; *428compensation or satisfaction imposed by law for a wrong or injury caused by a violation of a legal right.' " Majority opinion at 414. The definition of "damages" provided by Webster's dictionary and utilized by the majority is basically a reiteration of the accepted technical meaning of the term. It is compensation for past wrongs or injuries. There is no reference in Webster's dictionary that would lead even a reasonable layperson to believe that "damages" includes the cost of complying with prospective injunctive relief or attorney fees sought by an opposing party in the underlying litigation.
The majority's expansive definition of the term "damages" does not comport with even its ordinary and common meaning. For example, assume a landowner obtained an injunction to prospectively prevent a trespasser from cutting across his land on the way to work. Under the majority's expansive definition of "damages," the trespasser's insurer would be liable to the trespasser for the reasonable value of the extra daily effort by the trespasser to walk around the landowner's property. Even a reasonable layperson would conclude that this does not constitute "damages."

 See also Marek v. Chesney, 473 U.S. 1, 9 (1985).