In a current case from the Wisconsin Courtroom of Appeals, Cincinnati Insurance coverage Firm v. Ropicky, 1 the courtroom held that insurers could not deny professional claims based mostly on coverage exclusions that the insurer has broadly utilized. The courtroom 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 based mostly on the favored coverage exclusions for building defects and fungi, and the trial courtroom granted abstract judgment in favor of the insurer. The appellate courtroom reversed and remanded the case to the trial courtroom and restored the insured’s unhealthy religion declare, stating that the decrease courtroom improperly granted abstract judgment in favor of the insurer based mostly on the next:
Ensuing Loss Exception
The Wisconsin Courtroom 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 house, because the rainwater was a definite reason for the loss. In making its findings, the appellate courtroom cited a earlier case, Arnold v. Cincinnati Insurance coverage Firm, 2 through which they made the same ruling. In that case, the courtroom, confronted with comparable coverage language, held that that coverage language was additionally supposed to cowl losses ensuing from a building 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 Could 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 courtroom 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 accommodates a ‘ensuing loss’ exception, in that if defective workmanship ends in a coated reason for loss, then protection is afforded for the ensuing loss or harm attributable to the coated reason for loss, although protection is just not afforded for the price of correcting the fault or defect itself. For my part, a ensuing loss is roofed even when defective workmanship is a ‘however for’ reason 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 remove the conduct or defect from consideration in analyzing the reason for ensuing harm; until, in fact, there is no such thing as a ensuing harm and the loss consists solely of the conduct or defect itself, through which case protection doesn’t apply. Put one other means, solely the precise bodily peril inflicting the ensuing harm is topic to the protection evaluation.
Fungi Exclusion
The Wisconsin Courtroom of Appeals additionally dominated that the language in “Fungi Extra Protection,” which says,“[t]o the extent protection is supplied for,” is just not restricted by the separate Fungi Exclusion. As a substitute, the language needs to be interpreted as “if” or “so long as” protection is supplied and never seen as a bar to the quantity of protection for an insured. The courtroom reasoned that this was the commonsense interpretation, as Fungi Extra Protection and the Fungi Exclusion are separate within the coverage. Due to this fact, the exclusion doesn’t apply when protection is offered.
General, this choice is a win for policyholder rights, because the courtroom reaffirmed its stance on insurers making use of exclusions too broadly as a way to restrict protection, particularly when the coverage contains exceptions to exclusions which can be supposed 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.2nd 762 (Wis. Ct. App. Sept. 23, 2004).
