Wisconsin Supreme Court Redefined the Boundary Lines of Occurrences

Recently the Wisconsin Supreme Court narrowed the concept of “occurrence” as defined in homeowners policies.

In Schinner v. Gundrum, 349 Wis.2d 529, 833 N.W.2d 685 (2013), the court held the insured’s actions in setting up an isolated shed for a drinking party, procuring alcohol and expecting others to bring alcohol, inviting many underage guests to the party, and encouraging the underage guests to drink were intentional actions that violated the law. The insured’s many intentional wrongful acts were a substantial factor in causing bodily injury to a guest who attended the party. Viewed from the standpoint of a reasonable insured, the court held that the insured’s intentional actions created a direct risk of harm resulting in bodily injury, notwithstanding the insured’s lack of intent that a specific injury would occur. As such, the victim guest’s bodily injury was not caused by a defined “occurrence” within the meaning of the homeowners policy.

The facts of the case establish that the insured hosted a party in a shed at the location of Gundrum Trucking. Other parties were hosted by the insured at the shed in the past. The insured invited guests by texting friends about the party with the expectation that the friends would, in turn, text and tell others so that the party would be well attended. On the night in question 40 partygoers came to the shed for the party. The insured estimated that 40 to 50 percent of the guests were underage.

The insured’s extended family stored personal items of property in the shed. Some of the items in the shed, snowmobiles, were insured under a homeowners policy. The shed was referred to as the “toy shed.” However, a portion of the shed was also set up for parties. The party portion of the shed was furnished with couches, chairs, a table, a Ping-Pong table, a CD player and a refrigerator.

Alcohol was prevalent at the party. Some of the guests brought their own alcohol, including underage guests who were expected to obtain alcohol from people who were of legal drinking age. The insured also purchased two cases of beer for a friend and himself. The beer was kept in the refrigerator in the shed which was available for people who did not bring their own alcohol to the party. One of the party games was “beer pong” which utilized the Ping-Pong table in the shed and encouraged more alcohol consumption.

Cecil was one of the underage intoxicated guests who participated in beer pong. He was known prior to the party by the insured and others to have a propensity to become belligerent when intoxicated. The insured testified that he knew from previous occasions that Cecil would become confrontational, had a history of picking on weaker kids, and used inflammatory language when intoxicated.

At the party, Cecil assaulted a guest by punching him twice in the face and then kicking him in the head after the guest had fallen to the ground. The guest was seriously injured in the assault. The injured guest sued the insured and his insurer, West Bend, for the injuries received at the party.

No Occurrence

Procedurally, the Circuit Trial Court granted West Bend’s motion for summary judgment concluding there was no occurrence because the insured’s conduct in providing alcoholic beverages to underage persons was intentional and therefore was not an occurrence. The Wisconsin Court of Appeals reversed the Circuit Trial Court finding that the assault was an accident from the injured guest’s standpoint and therefore coverage was triggered under the homeowner’s policy. The issue then came before the Wisconsin Supreme Court.

The Wisconsin Supreme Court began its analysis by determining from whose standpoint an alleged action should be viewed: the injured party or the insured. After reviewing prior case law, the court held that “when an insured is seeking coverage, the determination of whether an injury is accidental under a liability insurance policy should be viewed from the standpoint of the insured.”

Next, the court addressed whether an accident had taken place. Reviewing prior Wisconsin case precedent, the court concluded that an “accident” was “an unintentional occurrence leading to undesirable results.” Using that definition of “accident,” the court concluded that the insured’s actions did not constitute an accident.

The Wisconsin Supreme Court then moved forward in its analysis to determine: What was the injury causing event in the case? Was it Cecil’s assault on the guest or was it the actions of the insured in hosting the party? The court noted that the injured guest had alleged that the wrongful conduct of the insured had caused the bodily injury. There was no question that Cecil intended the assault.

Intentional Act

The court found that the allegations of the injured guest’s complaint as well as other evidence made it clear that the insured took a number of intentional actions that ultimately caused the guest’s injury. The insured intended to host the party and, based on the experience from an earlier party he hosted, the insured intended that the “individuals he invited would invite other youths, who would in turn invite others.” The insured intended that minors attend his party. The insured “knew and expected that a substantial number of individuals” were under the legal drinking age and that the underage attendees would consume alcohol made available to them at the party. By making the arrangements for beer pong throughout the evening, the insured actively promoted heavy drinking at the party. This conduct violated Wisconsin law.

In addition, the insured knew that Cecil was an underage individual who became belligerent when intoxicated. Nevertheless, the insured “encouraged, advised and assisted Cecil in his consumption of alcohol.” The insured’s actions in hosting an underage drinking party and in procuring alcohol for Cecil and others were intentional. In short, the insured’s actions were entirely volitional. As noted by the court, the insured “did not host the underage drinking party by mistake, against his will, or by chance.”

The court stated that “[a] result, though unexpected, is not an accident; the means or cause must be accidental.” The court found that “the means or cause” of the guest’s bodily injury was not accident. “The intentional, illegal procuring and serving of alcohol to Cecil exposed [the guest] to harm. [The insured’s] many intentional acts were a substantial factor in causing [the guest’s] bodily injury.” The events leading up to the bodily injury were not remote and were not accidental.

Although the court noted that as a general rule, where an insured acts intentionally to cause bodily injury to another, insurance coverage for the injury is typically not available, the court also noted that the case facts presented a more difficult situation to decipher because the bodily injury was not intended and there was no certainty that the bodily injury would have occurred.

On the other hand, the court noted the bodily injury was hardly unforeseeable. “All the conditions for a tragic injury had been put in place, and they were put in place intentionally.” The Wisconsin Court noted that “when 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.”

Justice Bradley dissented. Although Justice Bradley agreed with the majority holding that the determination of what constituted an “occurrence” was to be analyzed from the standpoint of the insured, Justice Bradley concluded that there was nothing in the record to suggest that the insured intended the assault or any subsequent injury to the guest. Therefore, the assault was unintended and was an “accident” constituting an “occurrence” under the policy.