The Wisconsin Supreme Court on Friday, July 12, 2013 held that an insurance company had no duty to defend and indemnify an owner of property who hosted an underage drinking party because there was no “accident” and therefore no “occurrence” under the insurance policy. The case is Schinner v. Gundrum, 2013 WI 73.

Facts

At the time of the incident, the insured (Michael Gundrum, 21) was covered under his parents’ West Bend Mutual Insurance homeowner’s insurance policy as a resident of their household. Gundrum hosted a party in a shed on his family’s business property. The Gundrums had used the shed, in part, to store personal property.

Gundrum provided alcohol to Matthew Cecil during the party, who was under the drinking age. Cecil in turn assaulted the plaintiff, Marshall Schinner, who suffered serious injuries. Schinner sued Gundrum for negligence, alleging that Gundrum’s providing Cecil the alcohol was the cause of the assault and thus Schinner’s injuries.

West Bend argued that the case should be dismissed from the suit because there was no “accident,” and therefore no “occurrence,” under the policy. The policy defined “occurrence” as “an accident including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the coverage period, in: a) ‘bodily injury’ or, b) ‘property damage.’”

The trial court agreed with West Bend’s arguments and issued a summary judgment dismissing West Bend from the suit.

Court of Appeals Decision

The court of appeals reversed the circuit court. The court focused on the term “accident,” which was not defined in the policy. The court held that the assault was in fact an “accident” and therefore was an “occurrence” under the homeowner’s insurance policy.

According to the court, although “it may seem counterintuitive to think of an assault as accidental,” the court held that the assault in this case did in fact constitute an accident. Specifically, the court held that, for the purposes of determining whether an assault is an “accident” under an insurance policy, the assault and resulting injuries must be viewed from the standpoint of the person injured, rather than the person committing the assault.

The court further held that the exclusion for non-insured locations did not apply. The homeowner’s policy contained an exclusion barring coverage for bodily injury or property damage “arising out of a premises…owned by an insured…that is not an insured location.”

According to the court, even though the assault took place in Gundrum’s parents’ business shed – which was listed as a non-insured location under the homeowner’s exclusion policy – the exclusion did not apply. The court held that there was no evidence of a correlation between the assault and any condition of the shed; that is, no condition of the shed was a cause of the assault or Schinner’s injuries.

Supreme Court Decision

The Supreme Court in a 4-3 decision (Justice David Prosser writing the opinion joined by Justices Patience Roggensack, Annette Ziegler, and Michael Gableman) reversed the court of appeals.

According to the court:

“Gundrum’s action 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—especially an underage guest known to become belligerent when intoxicated—were intentional actions that violated the law. Gundrum’s many intentional acts were a substantial factor in causing Schinner’s [plaintiff] bodily injury. Viewed from the standpoint of a reasonable insured, Gundrum’s intentional actions created a direct risk of harm resulting in bodily injury, nothwithstanding his lack of intent that a specific injury occur. Thus, Schinner’s bodily injury was not caused by an ‘occurrence’ within the meaning of the policy, and West Bend is not obligated to provide insurance coverage for Gundrum.”

The court further held:

“Second, even assuming there was an occurrence under the West Bend homeowner’s policy, coverage is excluded because the injury arose out of the use of an isolated shed for an underage drinking party on uninsured premises.  The fact that the Gundrums kept some personal property insured under the policy at the shed did not make the shed a premises used in connection with the insured’s residence, as those terms are defined in the policy.  Thus, the business shed was not an insured location triggering coverage under the homeowner’s policy.”

Justice Ann Walsh Bradley wrote the dissenting opinion and was joined by Chief Justice Shirley Abrahamson and Justice Patrick Crooks (Part II of the dissent).