An appeals court from the dairy state was asked to resolve a coverage dispute with its roots in the mid ‘90s. Soils engineer Clifton Lawson entered a contract to test a construction site for The Renschler Co. Lawson advised Renschler that the soil provided inadequate support. Then Lawson suggested bringing in fill and compacting it at the site to make it suitable. Renschler, who had been hired by The Pleasant Co. to erect a building, agreed to Lawson’s recommendation.

The compaction, handled by Lawson and Renschler, turned out poorly. After most of the building had been built, it started to settle. The settling created substantial damage to the new construction. Lawson demanded that it and Renschler arbitrate the damages. The arbitration provision was in accord with the CGL policy issued to Renschler by its carrier, American Family (note, the insurer also provided an excess liability policy). The focus of the arbitration was Pleasant’s claim that Renschler breached its obligation to properly execute the building contract.

Upon notification of the arbitration request and on getting details on the dispute, American Family filed for a summary judgment. The carrier argued that the dispute involved Renschler, assuming Lawson’s liability via a separate contract. American pointed out that its CGL excluded coverage for assumed liability except in cases where liability existed, regardless of any contract. Therefore, it believed that it had no obligation to either defend or pay for any damages related to Lawson’s work. Four carriers who issued coverage for policies periods after American’s tenure, joined Renschler as parties to the action. The trial court found against American, deciding that its policy exclusion was inapplicable. American appealed the decision.

The higher court examined the issued, spending considerable effort on other cases it decided that were related to the issue. The higher court disagreed with the lower court’s reasoning that assumption of liability exclusions applied only to hold harmless and indemnification contracts. The appellate court decided that precedent supported a finding that American’s policy exclusion did bar recovery. It held that Renschler’s responsibility for the damages caused by the subcontractor arose directly from its separate contract with Lawson. The higher court ruled in favor of American, finding that its exclusion relieved it from an obligation to respond to the damages being arbitrated by Renschler and Pleasant.

(Note: the higher court affirmed part of the original court decision involving the lack of any obligation of any of the insurers who provided Renschler with CGL and excess liability policies subsequent to American)

American Family Mutual Insurance Company, Plaintiff-Appellant/Cross Respondent, v. The Pleasant Company, Defendant-Respondent/Cross-Appellant, The Renschler Company, Incorporated, Defendant-Third-Party Plaintiff-Respondent/Cross-Appellant v.Western American Insurance Company, The Ohio Casualty Insurance Company, regent Insurance Company and General Casualty company of Wisconsin, Third-Party Defendants-Respondents/Cross-Respondents. Wisconsin Court of Appeals, District Four. No. 01-1871. Filed August 29, 2002 2002 Wisc. App. Lexis 976. Affirmed in part, reversed in part and remanded. CCH 7450