WI Court of Appeals rules insurer liable for unfair trade practices.

• Author: Ziemer, David

Byline: David Ziemer

A standard Commercial General Liability (CGL) policy does not exclude coverage for statutory misrepresentation, the Wisconsin Court of Appeals held on Aug. 23.

The decision effectively renders standard exclusions for the insured's misrepresentations a nullity.

In 1995, Robert Stuart and his wife, Lin Farquhar-Stuart, contacted Ronald Weisflog, president of Weisflog's Showroom Gallery, Inc., a corporation in the business of building and remodeling homes, about making additions to their home, including a hot tub/spa room.

Weisflog represented to the Stuarts that they were purchasing quality architectural services and that the specifications in the drawings would comply with all applicable building codes. In fact, nobody at Weisflog was a licensed architect and Weisflog was not familiar with parts of the local building code.

Relying on the representations, the Stuarts entered into a contract for the additions, and Weisflog constructed them.

In 2001, the Stuarts noticed damage in the spa room. An inspector identified several building code violations in the spa room and rest of the project. According to the inspector, the damage was so extensive that it made more sense to demolish the spa room and rebuild than to repair it.

The Stuarts brought suit against Weisflog and its CGL insurer, American Family Mutual Ins. Co., alleging negligence, breach of contract, and violations of Wis. Admin. Code ch. ATCP 110.

American Family moved for summary judgment, arguing that the violations did not constitute an "occurrence" under its policy, and that the economic loss doctrine barred damages for negligence.

The trial court denied the motion, and the case went to a jury on the issues of negligence and the ch. 110 violations. The Stuarts dismissed their breach of contract claims.

The jury found Weisflog negligent, and found that that Weislflog induced the Stuarts to enter the contract by misrepresentations. It attributed 25 percent of the $95,000 damages to the misrepresentations, and 75 percent to the negligence.

The district court thus awarded the double damages authorized by ch. 110 only on 25 percent of the damages.

All parties appealed, and, in a previous decision, the court of appeals held as follows: the economic loss doctrine does not bar recovery; and the apportionment of damages between negligence and misrepresentation was improper, so that the entire award should be doubled. Stuart v. Weislflog's Showroom Gallery, Inc., 2006 WI...