In a current case from the Wisconsin Court docket of Appeals, Cincinnati Insurance coverage Firm v. Ropicky, 1 the court docket held that insurers could not deny respectable claims primarily based on coverage exclusions that the insurer has broadly utilized. The court docket emphasised that when coverage language contains exceptions that restore protection, insurers could not broadly deny protection and ignore these exceptions.
Right here, Cincinnati Insurance coverage Firm denied protection to the insured primarily based on the favored coverage exclusions for development defects and fungi, and the trial court docket granted abstract judgment in favor of the insurer. The appellate court docket reversed and remanded the case to the trial court docket and restored the insured’s unhealthy religion declare, stating that the decrease court docket improperly granted abstract judgment in favor of the insurer primarily based on the next:
Ensuing Loss Exception
The Wisconsin Court docket of Appeals dominated that the following loss exception to the Building Defect Exclusion reinstated protection for the insured for harm attributable to rainwater infiltration attributable to a faulty situation within the residence, because the rainwater was a definite explanation for the loss. In making its findings, the appellate court docket cited a earlier case, Arnold v. Cincinnati Insurance coverage Firm, 2 during which they made the same ruling. In that case, the court docket, confronted with related coverage language, held that that coverage language was additionally meant to cowl losses ensuing from a development defect if mentioned harm was circuitously excluded.
Merlin Regulation Group has written extensively about ensuing loss exceptions. Chip Merlin referred to “ensuing loss” provisions as “Lazurus” clauses in property insurance coverage insurance policies in Water Loss Denied? Ensuing Loss Provisions Might Present Protection, and Whipped Cream, Honey and Coated Ensuing Loss Delights.
“Ensuing loss” provisions are the “Lazarus” clauses in property insurance coverage insurance policies. Property harm claims in any other case excluded from protection, are raised from the lifeless and paid because of them. They’re obscure, and the court docket choices appear inconsistent. Nonetheless, when there appears to be an occasion that’s excluded, many instances a water harm occasion, these clauses are sometimes the one technique of restoration.”
My Chicago-based colleague, Ed Eshoo, additionally famous that these clauses are typically referred to and written as “ensuing loss” exceptions in The place There Is Smoke, There Is… A Denial, the place he defined:
[T]he defective workmanship exclusion comprises a ‘ensuing loss’ exception, in that if defective workmanship leads to a coated explanation for loss, then protection is afforded for the ensuing loss or harm attributable to the coated explanation for loss, although protection just isn’t afforded for the price of correcting the fault or defect itself. In my view, a ensuing loss is roofed even when defective workmanship is a ‘however for’ explanation for the loss. In that regard, the intent of the exclusion and exception is to exclude solely that portion of the loss attributable to the defective workmanship. The exclusion and exception, learn collectively, function to get rid of the conduct or defect from consideration in analyzing the reason for ensuing harm; until, after all, there is no such thing as a ensuing harm and the loss consists solely of the conduct or defect itself, during which case protection doesn’t apply. Put one other approach, solely the precise bodily peril inflicting the ensuing harm is topic to the protection evaluation.
Fungi Exclusion
The Wisconsin Court docket of Appeals additionally dominated that the language in “Fungi Further Protection,” which says,“[t]o the extent protection is offered for,” just isn’t restricted by the separate Fungi Exclusion. As an alternative, the language ought to be interpreted as “if” or “so long as” protection is offered and never seen as a bar to the quantity of protection for an insured. The court docket reasoned that this was the commonsense interpretation, as Fungi Further Protection and the Fungi Exclusion are separate within the coverage. Due to this fact, the exclusion doesn’t apply when protection is obtainable.
General, this resolution is a win for policyholder rights, because the court docket reaffirmed its stance on insurers making use of exclusions too broadly with a purpose to restrict protection, particularly when the coverage contains exceptions to exclusions which can be meant to revive protection for policyholders in sure circumstances. It follows prior reasoning famous in Overbroad Denial Letters Are Misleading and Not in Good Religion.
Thought For The Day
“There’s nothing like autumn in Wisconsin, with the leaves turning, the Packers profitable, and the brats grilling.”
—Brett Favre
1 Cincinnati Ins. Co. v. Ropicky, No. 2023AP588, 2025 WL 5220615 (Wis. Ct. App. Dec. 26, 2024).
2 Arnold v. Cincinnati Ins. Co., 276 Wis.second 762 (Wis. Ct. App. Sept. 23, 2004).
