THE IMPORTANCE OF READING THE INSURANCE POLICIES. Water Damage Occurring Over Several Year Period Can Be "Occurrence" Covered Under Insurance Policy
This case makes it very clear that the policyholders (insureds)
must read their policies to determine if they are covered or not. The insureds should not simply rely on what
the insurer tells them about coverage.
The resolution of every case depends on the facts of the case
and the language of the policy. Read
about the situation that led to a covered claim in a Federal Court in Wisconsin
involving Chubb Indemnity Insurance Company.[1]
In October 2010, the policyholders discovered that water
infiltration had been causing damage within the building envelope of the home.
The infiltration was ongoing and progressive in nature, beginning around the
time of original construction and continuously occurring with each subsequent
rainfall. On December 22, 2010, they submitted a claim to Chubb for the
discovered damage; Chubb denied coverage.
The U.S. Court of Appeals for the 7th Circuit ruled that Chubb
had to pay a policyholders’ claim for continuous water damage their home
sustained over a 16 year period. The Chubb policy coverage ended in 2005, about
five years before the policyholders discovered the damage in 2010. Despite
this, they were still entitled to coverage. Wisconsin has a “continuous trigger
theory,” which means that the injury occurs continuously from exposure until
the property owner discovers the damage. Chubb wanted the Court to apply a
“manifestation theory,” which means the injury does not occur until it shows
itself as property damage—because that would have been outside of its policy
period. The 7th Circuit Court noted that Wisconsin court have never adopted the
manifestation theory for all first party claims despite policy language.
Chubb argued that the trial court ruling would open the door to
insurance carrier liability arising from stale policies. In the case, it was
Chubb’s own policy language—which stated that it would provide coverage for all
risks of physical loss to the property if the claim was from an occurrence that
took place while the policy was in place—that resulted in their conclusion. The policy defined “occurrence” as continuous
or repeated exposure to substantially the same general conditions. Under this
definition, the water damage is a single occurrence according to the Court. The
opinion stated this as to the drafting of the policy:
The Chubb defendants were in the best position to dictate how
the policy would be activated, its coverage, and its exclusions. Letting the
Chubb defendants off the hook now would reward their sloppy drafting. It is not
the province of this court to alter the unambiguous terms of the policy.
This case is important for policyholders and their
representatives. The insurance companies argued that the continuous trigger
theory was out of place in first-party property insurance cases and that it
should be left to third-party cases. That argument was rejected—depending on
the jurisdiction you are in it will be important to know if it follows this
theory if the wording of the policy is similar to the policy in this case.
The entire decision of the Court of Appeals is presented below.
United States Court of Appeals
For the Seventh Circuit
No.
13-2580
RANDAL STRAUSS AND DIANE
STRAUSS,
Plaintiffs-Appellees,
v.
CHUBB INDEMNITY INSURANCE COMPANY, VIGILANT INSURANCE COMPANY, FEDERAL INSURANCE COMPANY, AND GREAT NORTHERN INSURANCE COMPANY,
Defendants-Appellants.
Appeal from the United
States District Court for the Eastern
District of Wisconsin
No. 11 CV 981 — Aaron
E. Goodstein, Magistrate Judge.
ARGUED FEBRUARY 10, 2014 — DECIDED
NOVEMBER 18, 2014
Before HAMILTON, Circuit Judge, and KENDALL, District Judge.[2]
KENDALL, District Judge. Randal and Diane Strauss constructed a home in Mequon, Wisconsin
in 1994. The Strausses insured the home with a number
of policies
(collec- tively, “the Policy”) issued by Chubb Indemnity Insurance Company, Vigilant Insurance Company, Federal Insurance Company, and Great Northern Insurance Company (collec- tively, “the Chubb Defendants”) from October 1994 to October 2005. Water infiltrated and damaged the home through
a defect present since the completion of construction; however, the damage went undiscovered until 2010,
well after the Policy expired.
When the Strausses submitted
a claim to the Chubb Defendants seeking recovery for the damage,
they refused coverage, contending that because the damage manifested in 2010 and the “manifestation” trigger applies to first-party property insurance, it could
not be responsible for
the damage. The Chubb Defendants additionally asserted that the claim was submitted
well beyond the applicable statute of limitations. See
Wis. Stat. § 631.83(1)(a). The Strausses subsequently brought
this action. The district
court concluded that the “continuous” trigger theory applied due to the language of the Policy such that coverage
existed for the entire loss. Because the continuous trigger
theory applied,
the district court found
that the claims were not time-barred. The Chubb Defendants now appeal, arguing that (1) the manifestation trigger theory applies to first-party property insurance
policies universally and (2) the Strausses’ suit was not timely
filed. For the following
reasons, we affirm.
I.
Background
The Strausses built their
home in Mequon, Wisconsin in 1994. To insure the home, they purchased a “Chubb Master- piece Deluxe
Home Coverage” first-party property insurance
policy. The Policy was issued by the Chubb Defendants over the years,
from
the
time of construction
in October 1994 through October
2005.[3] From 2005 onward,
the
Strausses
obtained insurance coverage
for the home from other providers.
The Policy states that coverage
is limited “only to occur- rences that take place while this policy is in effect.”
“Occur- rence”
is defined as “a loss or accident to which this insurance
applies occurring within the policy
period. Continuous or repeated exposure to substantially the same general
conditions unless excluded is considered to be one occurrence.” Under
the Policy taken out by the Strausses, a “ ‘covered loss’ includes
all risk of physical
loss to [the] house or other property
. . . unless
stated otherwise or an exclusion
applies.” In addition, the Policy
includes a “Legal Action Against Us”
clause, mandating
that any action against
the Chubb Defendants be brought “within
one year after a loss occurs.”
In October 2010, the Strausses discovered that water infiltration had been causing
damage within the building envelope
of the home. The infiltration was ongoing and progressive in nature,
beginning around the time of original
construction and continuously occurring with each subsequent rainfall. On December
22, 2010, the Strausses submitted a claim to the Chubb Defendants for the discovered damage.
The Chubb Defendants denied coverage, relying
on two
bases: (1) the damage was not discovered during any of their policy periods;
and (2) any legal action was time-barred pursuant to both the applicable Wisconsin Statute of Limitations, see Wis. Stat. § 631.83(1)(a), and the “Legal Action Against Us”
clause found in the Policy.
The Strausses filed suit in federal
court on October
19, 2011, within one year of their discovery
of the damage caused
by the water infiltration. The parties cross-moved for summary
judgment. The district court initially
denied both motions, finding factual issues regarding the language
of the Policy.
Upon reassignment to the Magistrate Judge and after clarifica- tion of the language within the Policy,
the parties sought
reconsideration of their motions for summary judgment. On February 13, 2013, the district
court concluded that the “continuous” trigger theory applied to the “occurrence based” Policy at issue because the Policy provided
coverage for ongoing
losses. Because
the “continuous” trigger theory applied,
the district court additionally found that the Strausses’ claim was not
time-barred. Accordingly, the Chubb Defendants
were deemed liable for the damage. Upon this
determination of liability, the parties stipulated
to damages while reserving any appellate rights. This timely appeal followed.
II. Discussion
We
review the district court’s
interpretation of the insurance policy, as well as its grant or denial of a summary judgment
motion, de novo. Nautilus Ins. Co. v. Bd. of Dirs. of Regal
Lofts Condo. Ass’n, 764 F.3d 726, 730 (7th Cir. 2014); Omnicare, Inc. v. UnitedHealth
Grp., Inc., 629 F.3d 697, 723 (7th Cir. 2011).
Likewise, determinations of law in applying
a statute of limitations are reviewed
de novo. See
KDC Foods, Inc.
v. Gray, Plant, Mooty, Mooty & Bennett, P.A., 763 F.3d 743, 749
(7th Cir. 2014). The parties agree that Wisconsin law applies
to the key legal question presented
in this case: whether the “manifestation” trigger theory
or “continuous” trigger
theory applies
to the Policy. We construe
the Policy as it would be understood by a reasonable person in the Strausses’ position, but we will not interpret
the Policy to provide
coverage for risks the Chubb Defendants did not contemplate and for which they did not receive premiums. See Am. Family Mut. Ins. Co. v. Am.
Girl, Inc., 268 Wis.2d 16, 673 N.W.2d 65, 73 (2004).
The interpretation of an insurance contract
is a question
of law. Plastics Eng’g Co. v. Liberty Mut. Ins. Co., 315 Wis.2d 556, 759 N.W.2d 613, 620 (2009).
In Wisconsin, insurance
policies are interpreted under the same rules that apply to contract construction.
See
Marotz v.
Hallman,
302
Wis.2d 428,
734
N.W.2d 411, 421 (2007).
The primary objective in
interpreting a contract is to ascertain and carry out the intentions of the parties. Wadzinski v.
Auto-Owners Ins. Co., 342 Wis.2d
311, 818 N.W.2d 819, 824 (2012). The insurance policy’s words
shall be given their common and ordinary
meaning, and when the policy language is plain and unambiguous, the policy is enforced as written,
“without resorting to the rules
of construc- tion or principles from case law.” Johnson Controls, Inc. v. London Market, 325 Wis.2d 176, 784 N.W.2d 579, 586 (2010). If
the language
is ambiguous, its ambiguity is construed in favor of coverage
for the insured. Id.
The language of the policy
determines the extent of coverage.
Soc’y Ins. v. Town of Franklin, 233 Wis.2d 207, 607 N.W.2d 342, 345 (Wis. Ct. App. 2000).
A.
Coverage
For an insurance
policy to potentially provide coverage to an insured, a triggering event must occur during the policy’s period
of enforcement. Soc’y, 607 N.W.2d at 345-46.
Because a triggering event is necessary to implicate
coverage, the core issue in this case is how coverage is triggered under the Policy for the water infiltration
damage to the home. Wisconsin has described four different
theories to determine
whether a “triggering”
event occurred during a relevant policy
period:
The “exposure” theory fixes the date of injury as the date on which the injury-producing agent first contacted the body or the date on which pollution began. The “manifestation” theory holds that the compensable injury does not occur until it manifests
itself in the form of a diagnosable disease or ascer-
tainable property damage.
The “continuous trigger” theory, also known as the “triple trigger” theory, provides that the injury occurs
continuously from exposure until manifestation. Finally, the “injury-in- fact”
theory allows the finder of fact to place the injury at any point in time that the effects of expo- sure
resulted in actual and compensable
injury.
Id. at 346; see also Michael G. Doherty, Allocating Progressive Injury
Liability Among Successive Insurance Policies, 64 U. CHI. L. REV. 257, 261 (1997). Here, the competing theories put forth by the parties
are the manifestation and continuous triggers. Under the manifestation trigger theory, only the insurer that
bears the risk at the time the loss manifests or can be discerned
is responsible for indemnification once coverage
is found to exist. Prudential-LMI Commercial Ins.
v. Super. Ct.,
51 Cal.3d 674, 798 P.2d 1230, 1246-47 (1990).
Under the continuous trigger theory
in the context of progressive damage, all policies
in effect from the time the loss begins to the time the loss mani- fests owe coverage.
Plastics, 759 N.W.2d at 626. Selecting the proper trigger
theory is a prerequisite to determining whether the water infiltration damage was covered.
The Chubb
Defendants urge
us to impose the
manifestation trigger theory, primarily arguing that the continuous trigger theory
should be limited to third-party coverage cases
and that the manifestation trigger is the only trigger suitable to analyz- ing first-party property insurance policies. They cite a variety
of cases from jurisdictions across the country
utilizing the manifestation trigger in this context; however, noticeably absent
from this list is any decision from a Wisconsin court. See generally, Scottsdale Ins. Co. v. CB Entm’t, No. 11-22838-CIV, 2012 WL 2412154
(S.D. Fla. June 26, 2012); Mangerchine v. Reaves, 63 So.3d 1049 (La. Ct. App. 2011);
State Farm Fire & Cas. Co. v. Rodriguez, 88 S.W.3d 313 (Tex. App. 2004); John Q. Hammons Hotels,
Inc. v. Factory Mut. Ins. Co., No. 01-3654
CV S SOW, 2003 WL 24216814 (E.D. Mo. Aug. 14, 2003); Winding
Hills Condo.
Ass’n v. N. Am. Specialty Ins. Co., 332 N.J. Super. 85, 752 A.2d 837 (N.J. Super. Ct. App. Div. 2000); Bostick v. ITT Hartford Grp., Inc., 56 F. Supp.2d 580 (E.D. Pa. 1999);
S.W. Heischman, Inc. v. Reliance
Ins. Co., 30 Va. Cir. 235 (Va. Cir. Ct. 1993); Jackson v. State Farm Fire & Cas. Co., 108 Nev. 504, 835
P.2d 786 (1992); Prudential, 798 P.2d 1230 (Cal. 1990).
In essence, the Chubb Defendants seek a bright-line rule requiring
use of the manifestation trigger
theory in all first- party property
insurance coverage disputes. Conveniently enough,
we recently declined
this very same invitation to limit the continuous trigger to third-party coverage cases and universally apply the manifestation trigger
to first-party coverage cases:
Safeco asks us to carve out an exception and hold, despite a dearth of Wisconsin
caselaw, that the continuous trigger theory should only apply in third-party coverage cases because
the questions presented in third-party cases . . . aren’t present in first-party property damage claims. We aren’t
inclined to adopt an approach
that lacks support from Wisconsin’s
caselaw . . .
Miller
v.
Safeco Ins. Co. of Am., 683 F.3d 805, 810-11
(7th Cir. 2012). The Chubb Defendants contend that any reliance
on Miller is inapposite, arguing that it is factually distinguishable and that the relevant
discussion about trigger theories is dicta. Although
we ultimately concluded that deciding
the trigger issue in Miller was unnecessary, of pertinence to our analysis now
is that we decided
to refrain from instituting a rule without
guidance or input
from Wisconsin courts despite
being asked to by an insurance company
similarly situated to the Chubb Defendants. The lack of support
for limiting the continuous trigger
theory to the third-party liability context
from Wisconsin courts we noted in Miller still exists today. Chubb has not offered convincing
reasons to predict that the Wisconsin Supreme
Court would embrace a bright-line rule imposing
the manifestation trigger
theory on all first-party insurance
contracts, regardless of policy language. See Liberty Mut. Fire Ins. Co. v. Statewide
Ins. Co., 352 F.3d 1098, 1100 (7th Cir. 2003) (because this is a diversity
case, we apply the law of Wisconsin
as we believe the Wisconsin Supreme
Court would apply it). Defining contract
law is typically
within the province of the States, and we correspondingly do not find that the Wisconsin
Supreme Court would agree
with Chubb’s position. See
Loucks v. Star City Glass Co., 551 F.2d 745, 746 (7th Ci. 1977) (“[W]e sit as a court,
not as a legislature; it is not our province
as a federal appellate court
to fashion for [Wisconsin] what we are certain
many would say was a wise and progressive social policy.”).
The Chubb Defendants’ argument fails not only because
Wisconsin courts have never adopted a rule that applies the manifestation
trigger independent of the language
found in a policy in the first-party context
nor exiled the continuous trigger theory to the third-party liability landscape, but also because Wisconsin has unequivocally held that the language of a policy guides the analysis
and determines whether coverage exists. Kremers-Urban Co. v. Am. Emp’rs
Ins. Co., 119 Wis.2d 722, 351 N.W.2d 156, 164 (1984). In the context
of determining whether coverage was
implicated under a comprehensive liability policy, the Wisconsin
Supreme Court explained that the
policy language dictated its
decision:
We are invited to engage in a discussion
of whether policy coverage is triggered by ‘exposure’ to DES or marketing activities . . . or whether policy
coverage is triggered
by the ‘manifestation’ of adenosis
or cancerous lesions . . . We decline to engage in such discussion, because we limit our review to the language of the insurance policies. We restrict our interpretation of coverage of the various policies
to
the language of the insurance contracts.
Id. Wisconsin courts have consistently maintained this position. See
Johnson Controls, 784 N.W.2d at 596 n.20 (court refused to adopt a general rule regarding
layering insurance policies because “our analysis
is driven by policy language– not generalizable concepts”); Plastics, 759 N.W.2d at 626 (“In our analysis,
we are again driven by policy language”); Am. Girl, 673 N.W.2d at 75 (determination of whether an insurance
policy covers a claim depends upon policy language used); Soc’y, 607 N.W.2d at 346 (use of continuous trigger
theory was mandated by the policy language);
State Farm Mut. Auto. Ins. Co. v. Cont’l Cas. Co., 174 Wis.2d 434, 498 N.W.2d 247, 250 (Wis.
Ct. App. 1993) (“The resolution of any coverage
dispute is necessarily
governed by the terms of the policy as negotiated by the parties”); Wis. Elec. Power
Co. v. Cal. Union Ins. Co., 142 Wis.2d 673, 419 N.W.2d 255, 258 (Wis. Ct. App. 1987) (focusing on language and terms of policy
to determine whether cover- age was triggered). Given that Wisconsin
law provides a straightforward path for interpreting the Policy, “we won’t
clutter the matter by discussing another jurisdiction’s approach to different
policies and claims.”
Miller, 683 F.3d at 811. Because Wisconsin consistently bases its decisions
regarding coverage disputes solely
on the language contained
in the policies,
regardless of whether the disputed policy is for first- party or third-party liability, we consider the language of the policy in dispute rather
than rely on a general
theory that would apply regardless of policy language. We therefore
review the Policy as it was written and in the context
of current Wisconsin
law,
which does not require
the application of any single
trigger theory to first-party policies.
Turning to the language of the Policy as mandated by Wisconsin
case law, we find that the provisions found in the Policy require
the application of the continuous trigger theory.
The language demands this result. The Policy covers
“all risk of
physical loss to [the] house or other property
covered under
this part of [the
Policy], unless stated
otherwise or an exclusion applies.” The Policy applies
“only to occurrences that take place while this
policy is in effect.” “Occurrence” is a defined
term, meaning “a loss or accident to which this insurance
applies occurring within the policy period.
Continuous or repeated
exposure to substantially the same general
conditions unless excluded
is considered to be one occurrence.” These provisions are not ambiguous: given the Chubb Defendants’ definition of “occurrence,” which includes “continuous
or
repeated exposure,” the parties
“contemplated a long-lasting occurrence” that could give rise to a loss “over an extended
period of time.” See Plastics, 759 N.W.2d at 626. According
to the Policy’s plain language, coverage is triggered
when a “loss” “occurrence” takes place during the Policy’s
term. Once such an occurrence takes place, the Policy protects against “all
risk of physical loss” to the home. The latent water infiltration constituted a single occurrence under the Policy. Because the Policy covers all risk of physical
loss, the water damage triggered coverage.
The Chubb Defendants argue that the Policy language requires
the application of the manifestation trigger theory because “loss”
in the definition of “occurrence” is not qualified
by “physical” and
therefore means loss
discovery or manifesta-
tion. See Atl. Mut. Ins. Co. v. Lotz, 384 F. Supp.2d 1292 (E.D. Wis. 2002).
But here, the Chubb Defendants read ambiguity
into the Policy’s
provisions when there is none.
It is difficult
to imagine a clearer, plainer statement
than the Policy’s Deluxe
House Coverage language
that a “ ‘covered
loss’ includes all risk of physical
loss to [the] house.” We read the Policy from “the objective standpoint of what a reasonable insured would understand the policy to mean, not from the standpoint of what the insurer
intended.” Grotelueschen by Doherty v. Am. Family Mut. Ins. Co., 171 Wis.2d 437, 492 N.W.2d 131, 134
(1992). The only reasonable interpretation of the Policy’s “covered loss” definition is that physical
damage to the property triggers
coverage; otherwise this provision would be superfluous. See Progressive N. Ins. Co. v. Olson, 331 Wis.2d 83, 793 N.W.2d 924,
926-27 (Wis. Ct. App. 2010)
(“Interpretations that render policy language superfluous are to be avoided
where a construction can be given which lends meaning
to the phrase.”). We will not needlessly read ambiguity
into the Policy; but even if we did, that ambiguity
would be resolved
in favor of the Strausses. Id. at 926. The Chubb
Defendants marketed the Strausses’ Policy as their “Masterpiece” policy. A reasonable insured would understand this to be high-end coverage with high premiums and corresponding high-end service.
Here, while there was only one ongoing occurrence as defined by the Policy, there was continual, recurring damage to the property with each successive rainfall. The Chubb Defendants do not dispute that physical
damage to the building
envelope of the home took place during each policy period
from October 1994, when the home was constructed, to October 2010, when the effects of the water infiltration mani- fested.
Because the Policy language demonstrates that the parties
intended for the continuous trigger theory to apply, the
benefits of the Policy are now available to the Strausses. Although
the Chubb Defendants undoubtedly would prefer
to have limited
what occurrences trigger
coverage under the Policy, “when
[they] have failed to do so in the insurance contract
itself, this court will not rewrite the contract
. . . to release
the insurer from a risk it could
have avoided through a more foresighted drafting of the policy.” Kremers, 351 N.W.2d at 167. Because neither party contends that an exclusion applies, this completes
our analysis of determining whether
coverage exists under the Policy. See Miller, 683 F.3d at 809 (we use Wisconsin’s three-step process to determining coverage: (1) the policy
must first make an initial
grant of coverage; and (2) if so, we look at whether an exclusion
precludes coverage;
and (3) if an exclusion applies, we look to see whether an exception reinstates
coverage).
Before concluding our discussion
of the coverage question, we address
the Chubb Defendants’ argument
that a bright-line manifestation trigger
theory is supported by public
policy because it creates
certainty for insurers by preventing liability from arising
on stale policies. They additionally contend that the application of the continuous trigger theory to first-party property
insurance would have the effect of keeping all insurers liable for property damage
indefinitely, regardless of whether a policy is still in
effect. But these arguments pertain only to a situation where we impose a specific trigger theory on all first-party property
insurance contracts,
which we decline to do. Because we conclude
the Wisconsin Supreme
Court would not apply
a universal standard, insurance companies remain free to create innovative policies that they draft
according to the unique circumstances of each client and policy. In fact, this is apparently the business
strategy the Chubb
Defendants pursue as described in their 1999 Annual Report: “But there’s much more to taking care of customers
than competent claim handling. Exceeding expectations begins with designing Insurance
policies with innovative and often unique coverage features.” We accordingly abstain from limiting
Wisconsin insurance
companies to any single trigger
theory.
Creating a bright-line rule at the Chubb Defendants’ request because
they perhaps regret the language
they drafted for the Policy would be an inappropriate interference with the parties’ rights
to contract. See Balt. & O.S.W. Ry. Co. v. Voigt,
176 U.S. 498, 505 (1900) (“the usual and most important function of courts of justice
is rather to maintain and enforce contracts than to enable
parties thereto to escape from their obligation on the pretext
of public policy”);
Kuhl Motor Co. v. Ford Motor Co., 270 Wis. 488, 71 N.W.2d 420, 423 (1955).
The Chubb Defendants were in the best position to dictate
how the Policy
would be activated, its coverage, and its exclusions. Letting the Chubb
Defendants off the hook now would reward their
sloppy drafting. It is not the province of this Court to alter the unambiguous terms of the Policy.
B. Timeliness of the Suit
The Chubb Defendants argue that the Strausses filed their suit too late, past either a statutory deadline or a time limit imposed by the Policy. Wis. Stat. § 631.83(1)(a) provides that “[a]n action on a fire insurance
policy must be commenced
within 12 months after the inception
of the loss.” The phrase
“fire insurance” has been interpreted to include
all types of property indemnity insurance. Jones
v. Secura Ins. Co., 249 Wis.2d 623, 638 N.W.2d 575, 577 n.5 (2002); Borgen v. Econ.
Preferred Ins. Co., 176 Wis.2d 498, 500 N.W.2d 419, 421 (Wis. Ct. App. 1993).
But this statute of limitations is not absolute; parties
to an insurance contract
are free to alter the length of a statute
of limitations and the date that the limitation period
begins to run. See
Keiting v. Skauge, 198 Wis.2d 887, 543 N.W.2d 565, 567 (Wis. Ct. App. 1995) (“Public policy in this state permits
parties to bind themselves by contract to a shorter
period of limitation than that provided for by statute.”) (quoting State
Dept. of Pub. Welfare v. Le Mere, 19 Wis.2d 412, 120 N.W.2d 695, 699 (1963)).
This conclusion is bolstered by the fact
that § 631.83
explicitly prohibits insurance policies from
(a) limiting the time for beginning an action on a policy
to less than twelve months, (b) prescribing what court an action
may be brought in, and (c) providing
that no action may be brought
under a policy. Wis.
Stat. § 631.83(3). Accordingly, by its very terms, the statute
contemplates
its modification
between parties in private contracts, provided any alterations comport
with the three
prohibitions listed above. Just as policy
language determines how coverage
is triggered, policy language also dictates when an action may be brought.
The Chubb
Defendants altered
the limitation period for the Strausses to initiate
suit by diverging
from the language
found in § 631.83(1)(a). The Wisconsin
statute of limitations language
stating that a claim must be filed within one year “after the inception
of the loss” starts the clock running “from
the date of the damage
suffered by the insured from any peril covered
by the policy of insurance.” Riteway Builders, Inc. v. First
Nat’l Ins. Co. of Am.,
22 Wis.2d 418, 126 N.W.2d 24, 26 (1964). “Inception” means
“beginning; start;
commencement,” and therefore, “the phrase ‘inception of the loss’ rules out a construction which would postpone
the start of the period of limitation until the insured’s
loss is discovered, or should have been discovered.” Borgen, 500 N.W.2d at 422. Here, if the Policy employed the same language
as that found in § 631.83,
the Strausses’ claim might be time-barred because it was filed well after one year had passed
from the beginning of the water infiltration.
But the Policy employs different language. Rather
than require claims to be filed within one year “after the inception of the loss,” the Policy permits claims to be filed “within
one year after a loss occurs.” “After a loss
occurs” is fundamentally different from “after
the inception.” “Inception of the loss”
clearly and unmistakably means the beginning of damage, not to mention the fact that it has been unequivocally defined as such by Wisconsin
courts. On the other hand, “after a loss occurs”
is ambiguous as applied
to a progressive loss and can entirely reasonably be interpreted to mean after a loss com- pletes.
See Wood v. Allstate Ins. Co., 21 F.3d 741, 744 (7th Cir. 1994) (“after the date of
loss” could plausibly mean either
the date on which a fire began or the date on which the fire was extinguished). Because Wisconsin subscribes to the contract
tenet that ambiguities are to be construed in favor of coverage
for the insured, Johnson Controls, 784 N.W.2d at 586, we conclude that the Strausses could have brought their claim at
any point up until a year after the water infiltration damage halted.
In Wisconsin, under the continuous trigger theory, a
progressive loss “occurs continuously from exposure until manifestation.” Soc’y, 607 N.W.2d
at 346. Here,
because the
loss was ongoing and occurred
with each rainfall and because the Policy itself states that “[c]ontinuous or repeated exposure to substantially the same general conditions unless excluded
is considered to be one occurrence,” the loss, for purposes of the statute
of limitations, occurred all the way up until the damage
manifested in October
2010. The parties
do not dispute that the Strausses filed suit within one year of manifestation of the water infiltration. Therefore, their suit is timely.
III. Conclusion
The Policy’s language mandates the use of the continuous trigger theory for determining coverage. Similarly, the Policy’s definition of “occurrence” and alteration of the statute
of limitations made the Strausses’ claim timely. For the foregoing reasons, we AFFIRM the ruling of the district court.
[2] The Honorable Virginia
M. Kendall, District
Judge for the United States District Court, Northern
District of Illinois, sitting by designation. Chief Judge Wood recused
herself after oral argument
and has not participated in deciding this appeal. This decision is being issued by a quorum of the panel. See 28 U.S.C.
§ 46(d).
[3] Vigilant issued the
policy from October 1994 to October
2000 and October 2002 to October 2004; Federal from October
2000 to October 2002; Chubb from October
2004 to October 2005; and Great Northern
from October 2004 to October 2005.