In Wisconsin, the allegations in a Complaint control whether or not an insurer must defend a lawsuit. Negligence claims are usually covered by insurance. Hence, accidents are often covered but the intentional acts of an insured are not. The Wisconsin court of appeals however recently held there was no insurance coverage for a negligent misrepresentation claim because representations are “volitional acts,” not “accidents” within the meaning of an occurrence based insurance policy.
Overview of Decision
In John Doe 1 v. Commercial Union Insurance Company, 2009AP2266 (November 23, 2010), the plaintiffs sued the Archdiocese of Milwaukee, Wisconsin claiming that the Archdiocese’s negligent misrepresentation led to the abuse of children by former priests. The Archdiocese sought insurance coverage for the claims under their commercial general liability (“CGL”) insurance policy. The District I Wisconsin appeals court affirmed the circuit court ruling that denied insurance coverage to the Archdiocese.
The underlying acts that led to the plaintiffs’ injury were misrepresentations by the Archdiocese that the plaintiffs would be safe in the presence of the priests. The Archdiocese argued that because the complaint acknowledged that the Archdiocese did not “intend” or “anticipate” that the plaintiff would be harmed, coverage for the acts alleged existed. The court disagreed.
The court held that, “whether events are accidental for insurance purposes is not on whether a specific result was accidental, but rather whether the cause of the damage was accidental.” The court found that the affirmative representation of safety by the Archdiocese was a volition act. Therefore, even though it may have been prompted by negligence, it was devoid of any suggestion of accident. Further, the court held that it was irrelevant that the Archdiocese may not have intended to harm the plaintiffs because the Archdiocese intended to conceal its knowledge of the priests. The court held that degree of volition involved precluded the act from being characterized as accidental, unforeseen, or unintended.
The Wisconsin court of appeals’ decision builds upon the recent Wisconsin Supreme Court decisions in Everson v. Lorenz, 2005 WI 51, 280 Wis. 2d 1, 695 N.W.2d 298 and Stuart v. Weisflog’s Showroom Gallery, Inc., 2008 WI 86, 311 Wis. 2d 492, 753 N.W.2d 448 that held negligent misrepresentation claims required the allegation of some type of intentional conduct precluding insurance coverage in property damage cases. The court affirmed that Everson applies to all negligent misrepresentation cases, not just cases in the context of property damage claim.
Implications of Decision
To obtain insurance coverage for negligent misrepresentation in Wisconsin, the cause of the damage must have been accidental. Representations that are “volitional acts” are not considered “occurrences” under a CGL insurance policy. Therefore, insurance coverage does not exist for negligent misrepresentation when the representations are volitional acts.
Michael Best Involvement
In the John Doe cases and related coverage litigation, Michael Best represented an excess insurance carrier, whose coverage position was ultimately upheld and an insurance broker that was successfully dismissed from the coverage case on a motion to dismiss.