Schinner v. Gundrum—No Longer a Conundrum
In February 2012, the Wisconsin Court of Appeals decided Schinner v. Gundrum, holding that the determination of an “occurrence” under a liability policy is to be made from the standpoint of the injured party.1 Following this decision, many were left wondering whether liability insurers would be required to cover the intentional conduct of their insureds unless the injured party somehow provoked the conduct at issue.
This speculation did not last long. The Wisconsin Supreme Court reversed the court of appeals decision in July of 2013. The supreme court held that determination of an “occurrence” is to be made from the standpoint of the insured, not the injured party. The supreme court’s decision is significant not only because it narrows the definition of “occurrence” under liability policies, but also because it clarifies that coverage exclusions for damages “arising out of” a non-insured location are to be read broadly.
Background Information and Lower Court Decisions
Schinner originated from an assault at an underage drinking party. The defendant, Michael Gundrum, who was living with his parents at the time, hosted the party at a shed located near Slinger, Wisconsin.2The shed was not located at Gundrum’s residence, but at his parents’ business, Gundrum Trucking.3 The shed was used primarily for business purposes, but did store some personal items such as boats, a camper, and two snowmobile trailers.4
Gundrum invited Matthew Cecil to the party, and permitted Cecil to drink alcohol even though Gundrum knew that Cecil had a tendency to become belligerent when he was intoxicated.5 Plaintiff Matthew Schinner was also a guest at the party. Throughout the course of the party, Cecil harassed Schinner.6Although Gundrum attempted once to intervene, Cecil continued to harass Schinner throughout the night.7 Sometime around 2:30 a.m., Schinner attempted to leave the party and was followed to his vehicle by Cecil.8 When Schinner exited his vehicle, Cecil punched him in the face twice and then kicked him in the head after he fell to the ground.9 Schinner sustained serious injuries as a result.10
Schinner sued Gundrum and West Bend Mutual Insurance Company (West Bend) for damages he claimed were caused by Gundrum’s actions, including providing alcohol to Cecil.11
Gundrum’s parents had a homeowner’s policy through West Bend, which provided personal liability coverage for Gundrum.12 The coverage applied to an “occurrence.”13 The policy also contained an exclusion for bodily injury “arising out of” a premises that was not an “insured location.”14 In addition to the West Bend policy, there was a commercial policy for Gundrum Trucking, but it contained a liquor exclusion and so was not at issue.15
In the circuit court, West Bend moved for summary judgment, arguing that Gundrum’s actions were intentional and, therefore, the policy did not provide coverage.16 The court agreed with West
Bend, concluding that there was no “occurrence” under the policy because all of Gundrum’s actions were intentional (specifically, providing alcohol to minors). The court further held that coverage was foreclosed because the injury occurred at a non- insured location.17
The court of appeals reversed on two grounds.18 First, the court held that the assault, when viewed from the standpoint of the injured party, was an accident and, therefore, was an “occurrence” under the policy.19 In reaching this conclusion, the court of appeals cited three Wisconsin Supreme Court cases holding that the determination of “occurrence” was to be made from the standpoint of the injured party—Button v. American Mutual Accident Ass’n,20 Fox Wisconsin Corp. v. Century Indemnity Co.,21 and Tomlin v. State Farm Mutual Auto. Ins. Co.22 However, the court also acknowledged that this analysis seemed to conflict with a recent Wisconsin Supreme Court case, Estate of Sustache v. American Family Mutual Ins. Co.23 Regardless of whether “occurrence” was viewed from the standpoint of the injured or the insured, however, the court of appeals concluded that there was an “occurrence” in this case.24
Second, the court of appeals held that the policy’s exclusion for non-insured locations did not apply because “no particular condition of the premises correlate[d] to the basis of liability for the injury.”25 In other words, the fact that the assault occurred at a non-insured location, in and of itself, was not sufficient to exclude coverage under the policy.26 Rather, the court of appeals held that there needed to be a condition of the premises that led to the injury in order for the exclusion to apply, and because there was not, coverage was available.27
Wisconsin Supreme Court
West Bend petitioned the Wisconsin Supreme Court for review, which was granted on June 13, 2012.28In a 4-3 decision issued just over one year later, on July 12, 2013, the supreme court held that West Bend did not have a duty to defend or indemnify Gundrum. The majority reached this decision in two parts. First, it held that there was no “occurrence” under the policy because there were numerous intentional and volitional actions. Second, the court held that, even if there was an “occurrence” under the policy, coverage did not exist because the drinking party had been held at a non-insured location and was therefore excluded.
A. There Was No “Occurrence.”
First, the court concluded that there was no “occurrence,” which was defined in the policy as an“accident.”29 The policy did not define “accident,” so the court had to define the term itself. In doing so,the court had to decide whether the term “accident” was to be viewed from the standpoint of the insured or the injured party.30
1. “Accident” is determined from the standpoint of the insured, not the injured party.
The court determined that the term “accident” is to be viewed from the standpoint of the insured, not the injured party, rejecting the analysis of the court of appeals.31 The court noted that viewing the term “accident” from the standpoint of the insured adhered to longstanding precedent that insurance policies are to be interpreted from the standpoint of a reasonable person in the position of the insured. 32 Further, because courts are obligated to give effect to the intentions of the parties to the insurance policy, not a third party, it logically follows that the term “accident” has to be viewed from the standpoint of the insured.33
The court also noted that viewing an “accident” from the standpoint of the injured party would go against recent Wisconsin cases which had “considered whether the insured acted with lack of intent in a particular incident.”34 While these cases were not necessarily focused on the same specific issue, the supreme court determined that the analysis used was similar enough to warrant consideration and application.
Finally, the court examined the three cases cited by Schinner and the court of appeals as support for the conclusion that “accident” was to be viewed from
he standpoint of the injured party—Button, Fox, and Tomlin. The court did not find any of the cases to be controlling.
In the first case, Button, the insured plaintiff was injured by an unknown person who intentionally shot him.35 The “accident policy” at issue provided coverage against “death or injuries through ‘external, violent, and accidental means,’” but excluded coverage for intentional injuries.36 The supreme court held that “an injury intentionally inflicted on the insured person by another is an ‘accidental injury,’ when such injury is unintentional on the part of the insured.”37
Fox, the second case, involved an insurer who refused to indemnify the insured theater after a theater employee assaulted a patron, causing injury for which the theater was sued.38 The supreme court, applying Button, held that whether or not an injury was accidental was to be viewed from the standpoint of the injured party.39 The court in Schinner noted that the injured party in Button was also the insured party,40 and argued that the Fox court had misconstrued Button by substituting the word “injured” for the word “insured.”41 Therefore, the court in Schinner refused to adopt the holding in Fox.42
Finally, in Tomlin, a police officer was stabbed by a minor during a traffic stop.43 The supreme court in Tomlin noted that a majority of courts, including the Wisconsin Supreme Court, had recognized that the term “accident” had to be defined from the standpoint of the injured party.44 However, the court in Schinner refused to adopt the holding in Tomlin because it believed that the case was “extraordinary” and distinguishable on the grounds that the Tomlin court “may have perceived the parents as being in the same position as the theater in Fox.”45
Ultimately, the court did not find any of these cases controlling. Instead, based on its own analysis of the issue, the supreme court held that the determination of whether an injury is “accidental” under a liability insurance policy is to be viewed from the standpoint of the insured.46
2. Gundrum’s actions were intentional.
The court then held that Gundrum’s actions, from his own perspective as the insured, were not “accidental,” and therefore there was no “occurrence.” From prior cases defining “accident,” the court adopted the following definitions: “‘an unexpected, undesirable event’ or ‘an unforeseen incident’ which is characterized by a ‘lack of intention’”47; “an event or condition occurring by chance or arising from unknown or remote causes”48; “a result, though unexpected, is not an accident; the means or cause must be accidental”49; “an unintended and unforeseen injurious occurrence; something that does not occur in the usual course of events or that could not be reasonably anticipated”50; and an action involving “a degree of volition inconsistent with the term accident.”51
With these definitions in hand, the court turned to the facts.52 The court determined that the conduct at issue was not the assault by Cecil, but Gundrum’s actions that night including hosting the party, serving alcohol to minors, encouraging party-goers to consume large quantities of alcohol, inviting Cecil to the party, and encouraging Cecil to drink even though Gundrum knew that Cecil became belligerent when he drank.53 The court determined that Gundrum’s actions were intentional because he “did not host the underage drinking party by mistake, against his will, or by chance.”54 By hosting the drinking party and encouraging alcohol consumption, Gundrum exposed Schinner to harm.55 While Gundrum was not responsible for assaulting Schinner, his actions were a substantial factor in causing Schinner’s injuries.56
Further, the court held that the fact that Gundrum did not intend for Cecil to injure Schinner was irrelevant because the means or cause of the injury was intentional, and the injury was foreseeable.57“[W]hen an insured’s intentional actions create a direct risk of harm, there can be no liability coverage for any resulting damage or injury, despite the lack of an actual intent to damage or injure.”58 The fact that Gundrum (1) hosted the party, (2) invited Cecil, (3) stopped drinking when he realized a volatile situation was developing with the number of guests and the amount of alcohol being consumed, and (4) heard Schinner’s pleas to intervene when Cecil was harassing him, all helped to illustrate that a fight was foreseeable.59
Finally, the court noted that its holding made sense because a reasonable insured would not expect coverage for bodily injury that results from a large, illegal, underage drinking party.60 The court refused to send the message that insureds can engage in illegal actions and then expect their insurance companies to “foot the bill” for them.61
B. Even If There Had Been an “Occurrence,” Coverage Would Still Have Been Excluded Because the Injury Occurred at a Non-Insured Location.
Even though the court found that there was no initial grant of coverage due to the lack of an “occurrence,” it still went on to also decide that coverage was excluded because the injury “arose out of” a non-insured location. The policy at issue excluded coverage “for bodily injury...arising out of a premises that is not an ‘insured location.’”62 The policy defined “insured location” as “the residence premises,” “part of other premises, other structures and grounds used by you as a residence,” and “any premises used by you in connection with” the residence premises.63 The court held that the injury “arose out of” a non-insured location—the shed.64
Schinner and the court of appeals had relied on Newhouse v. Laidig, Inc.,65 for the proposition that there has to be some correlation between the negligence giving rise to liability and a condition of the premises in order to find that the exclusion applies.66 The supreme court disagreed, finding Newhouse too narrow in its interpretation of the exclusion.67 The court instead relied on Garriguenc v. Love,68 in which the supreme court had previously held:
The words “arising out of”... are very broad, general and comprehensive; and are ordinarily understood to mean originating from, growing out of, or flowing from. All that is necessary is some causal relationship between the injury and the event [here, “property”] not covered.69
Applying Garriguenc, the Schinner court held that there was a sufficient causal relationship between theshed and Schinner’s injury because a portion of the shed was set up to host social gatherings.70 Because Schinner’s “injury clearly arose out of, or originated, or flowed from” the non-insured location (the shed), coverage was excluded even if there had been an “occurrence” under the policy.71
Schinner also tried to argue that the existence of personal property in the shed was sufficient to find that the Gundrums had used the shed “in connection with” their residence.72 The court disagreed, concluding that allowing a business owner to claim that a non-insured location is sufficiently connected to a residence by merely storing personal property in/on it would defy common sense because it would allow business owners to forgo obtaining business insurance.73
Many commentators have pointed out that Schinner has narrowed the definition of “occurrence” by requiring courts to view “occurrence” from the standpoint of the insured.74 A full analysis of Schinner confirms that the holding does much more than that. In addition to requiring courts to view “occurrence” from the standpoint of the insured, Schinner also makes clear that unexpected results or damages alone will not be enough to find an “accident.” Instead, it is the act or the cause of the result or damages that must be accidental for there to be an occurrence. In adopting this interpretation, the Schinner decision further narrows the definition of “occurrence.”
Finally, Schinner clarifies that exclusions in liability policies for damages “arising out of” a non-insured location are to be read broadly. Specifically, the “arising out of” exclusion applies whenever there is a “causal relationship” between the non-insured premises and the insured’s actions that give rise to liability.
Shannon A. Buttchen, Wisconsin 2012, cum laude, is an associate attorney with the Madison office of Corneille Law Group, S.C. She specializes in the defense of personal injury and medical negligence cases.
1 Schinner v. Gundrum, 2012 WI App 31, 340 Wis. 2d 195, 811 N.W.2d 431.
2 Schinner v. Gundrum, 2013 WI 71, ¶ 11, 349 Wis. 2d 529, 538, 833 N.W.2d 685.
3 Id., ¶ 17; see also id. n.6.
4 Id., ¶ 19.
5 Id., ¶ 2.
6 Id., ¶ 23.
8 Id., ¶ 24.
11 Id., ¶¶ 26-28.
12 Id., ¶ 11.
13 Id., ¶ 12.
14 Id., ¶ 14.
15 Id., ¶
16 Id., ¶ 29.
17 Id., ¶ 30.
18 Id., ¶ 31.
19 Id., ¶ 32.
20 92 Wis. 83, 65 N.W. 861 (1896).
21 219 Wis. 549, 263 N.W. 567 (1939).
22 95 Wis. 2d 215, 290 N.W.2d 285 (1980).
23 Schinner, 340 Wis. 2d 195, ¶ 32 (citing Estate of Sustache
v. Am. Fam. Mut. Ins. Co., 2008 WI 87, 311 Wis. 2d 548,
751 N.W.2d 845).
25 Id., ¶ 33.
28 Id., ¶ 34.
29 Id., ¶ 39.
30 Id., ¶ 40.
31 Id., ¶ 52.
32 Id., ¶ 51.
34 Id. (citations omitted).
35 Schinner, 349 Wis. 2d 529, ¶ 46.
37 Id. (citing Button, 92 Wis. at 85).
38 Schinner, 349 Wis. 2d 529, ¶ 47.
43 Schinner, 349 Wis. 2d 529, ¶ 48.
44 Id. (citing Tomlin, 95 Wis. at 219).
45 Id., ¶ 49.
46 Id., ¶ 52.
47 Id., ¶ 56 (citing Doyle v. Engelke, 219 Wis. 2d 277, 289, 580 N.W.2d 245 (1998) (citing The American Heritage Dictionary of the English Language 11 (3d ed. 1992)). The Doyle court also looked at the dictionary definition of the term “negligence”—failure to exercise the degree of care considered reasonable under the circumstances, resulting in an unintended injury to another party—and determined that both definitions focused on unintentional occurrences which lead to undesirable results. The court concluded that “a reasonable insured would expect ... ‘event’ to include negligent acts.” Schinner, 349 Wis. 2d 529, ¶ 56 (citing Doyle, 219 Wis. 2d at 289-290).
48 Id., ¶ 58 (citing Am. Fam. Mut. Ins. Co. v. Am. Girl, Inc., 2004 WI 2, ¶ 37, 268 Wis. 2d 16, 673 N.W.2d 65).
49 Id.50 Id., ¶ 60 (citing Everson v. Lorenz, 2005 WI 51, ¶ 15, 280 Wis. 2d 1, 695 N.W.2d 298).
51 Id., ¶ 62 (citing Everson, 280 Wis. 2d 1, ¶ 19).
52 Id., ¶ 64.
53 Id., ¶ 68.
54 Id. (citing Everson, 280 Wis. 2d 1, ¶ 19).
55 Id., ¶ 69.
58 Id., ¶ 70 (citing Frankenmuth Mut. Ins. Co. v. Masters, 595 N.W.2d 832, 839 (Mich. 1999)).
59 Id., ¶ 71.
60 Id., ¶ 80.
63 Id., ¶ 15.
64 Id., ¶ 90.
65 Newhouse v. Laidig, Inc., 145 Wis. 2d 236, 426 N.W.2d 88 (Ct. App. 1988).
66 Schinner, 349 Wis. 2d 529, ¶ 86 (citing Newhouse, 145 Wis. 2d at 240).
67 Id., ¶ 87 (citing Garriguenc v. Love, 67 Wis. 2d 130, 137, 226 N.W.2d 414 (1975)).
68 67 Wis. 2d 130.
69 Schinner, 349 Wis. 2d 529, ¶ 87 (citing Garriguenc, 67 Wis. 2d at 137).
70 Id., ¶ 90.
71 Id., ¶ 89.
74 See, e.g., Burke Colman, Wisconsin Supreme Court Narrows Definition of “Occurrence”, Insurance Journal (September 9, 2013), found at: http://www.insurancejournal.com; Larry Mason, Wisconsin Supreme Court Narrows Property Insurance Definition of “Occurrence” in Favor of Insurers (August 13, 2013), found at: http://www.smsm.com; Michael Carter, Wisconsin Supreme Court Says “No Cover” for Party Goer Injured at Insured’s Underage Drinking Party (May 2014), found at: http://www.murnane.com.
© 2014 Wisconsin Defense Counsel. All rights reserved. Buttchen, Shannon A., Schinner v. Gundrum - No Longer a Conundrum, Wisconsin Civil Trial Journal (Summer 2014)