                                                             2013 WI 105

                  SUPREME COURT             OF   WISCONSIN
CASE NO.:               2011AP2608
COMPLETE TITLE:         Michael D. Phillips, Perry A. Petta and Walkers
                        Point
                        Marble Arcade, Inc.,
                                   Plaintiffs-Appellants-Petitioners,
                              v.
                        Daniel G. Parmelee and Aquila Group, LLC,
                                   Defendants,
                        American Family Mutual Insurance Company,
                                   Intervening Defendant-Respondent.



                          REVIEW OF A DECISION OF THE COURT OF APPEALS
                           Reported at 345 Wis. 2d 714, 826 N.W.2d 686
                                   (Ct. App. 2012 – Published)
                                      PDC No.: 2013 WI App 5

OPINION FILED:          December 27, 2013
SUBMITTED ON BRIEFS:
ORAL ARGUMENT:          October 23, 2013

SOURCE OF APPEAL:
   COURT:               Circuit
   COUNTY:              Milwaukee
   JUDGE:               Timothy M. Witkowiak

JUSTICES:
   CONCURRED:
   DISSENTED:
   NOT PARTICIPATING:   PROSSER, J., did not participate.

ATTORNEYS:
       For        the   plaintiffs-appellants-petitioners,   there   were
briefs by Christopher L. Strohbehn, Jason D. Luczak, and Gimbel,
Reilly, Guerin & Brown LLP, Milwaukee, and oral argument by
Christopher L. Strohbehn.


       For the intervening defendant-respondent, there was a brief
by Wayne M. Yankala and Mingo & Yankala, S.C., Milwaukee, and
oral argument by Mark Mingo.
                                                                     2013 WI 105
                                                              NOTICE
                                                This opinion is subject to further
                                                editing and modification.   The final
                                                version will appear in the bound
                                                volume of the official reports.
No.       2011AP2608
(L.C. No.    2010CV19544)

STATE OF WISCONSIN                          :            IN SUPREME COURT

Michael D. Phillips, Perry A. Petta and Walkers
Point Marble Arcade, Inc.,

              Plaintiffs-Appellants-Petitioners,

      v.                                                           FILED
Daniel G. Parmelee and Aquila Group, LLC,
                                                              DEC 27, 2013
              Defendants,
                                                                 Diane M. Fremgen
                                                              Clerk of Supreme Court
American Family Mutual Insurance Company,

              Intervening Defendant-Respondent.




      REVIEW of a decision of the Court of Appeals.              Affirmed.



      ¶1      SHIRLEY S. ABRAHAMSON, C.J.         This is a review of a

published decision of the court of appeals affirming an order of

the circuit court for Milwaukee County, Timothy M. Witkowiak,

Judge.1       The   circuit   court   granted    American       Family      Mutual

Insurance Company's motion to intervene and to bifurcate the

      1
       Phillips v. Parmelee, 2013 WI App 5, 345 Wis. 2d 714, 826
N.W.2d 686.
                                                                              No.     2011AP2608



proceedings         on    insurance      coverage       issues    from     proceedings         on

liability         and     damages.          The        circuit    court       then        granted

intervenor American Family's motion for declaratory and summary

judgment.          The circuit court held that American Family had no

duty to defend or indemnify Daniel G. Parmelee or Aquila Group,

LLC,       referred      to    collectively       as    the    defendant-sellers,            with

respect to claims asserted by Michael D. Phillips, Perry A.

Petta       and    Walkers       Point    Marble        Arcade,       Inc.,     referred      to

collectively as the plaintiff-buyers of the defendant-sellers'

real estate.2

       ¶2        The circuit court held that the asbestos exclusion in

the American Family policy precluded coverage.

       ¶3        The court of appeals affirmed the order of the circuit

court       in    favor   of     American     Family,         stating    that       the    policy

precludes coverage.

       ¶4        We affirm the decision of the court of appeals.

       ¶5        In the circuit court and court of appeals proceedings,

American         Family       argued   that   there       was    no     initial      grant     of
coverage under the policy.                The issue of coverage is not before

us.     The only issue presented is whether the asbestos exclusion

in the American Family Business Owners policy issued to the

defendant-sellers             precludes     coverage       for    the    losses       that    the

plaintiff-buyers claim.

       2
       Aquila Group purchased the building in April 2006.
Parmelee is the sole member of Aquila Group, a Wisconsin Limited
Liability Company.   In September 2006, Aquila Group sold the
property to Walkers Point.     Petta and Phillips own Walkers
Point.

                                               2
                                                                       No.    2011AP2608



                                            I

    ¶6      The essential facts for purposes of this review are

undisputed.

    ¶7      Prior       to    purchasing        an   apartment     building,     Aquila

Group    had     the    building       inspected.          The    inspection     report

indicated       that    the     building's       heating     supply    ducts     likely

contained asbestos.             Aquila Group obtained a Business Owners

policy   from        American    Family,    insuring       the    building.      Aquila

Group listed the property for sale.

    ¶8      In preparation for the sale of the building, Parmelee

completed and signed a Real Estate Condition Report.                         The Report

contained a statement that the defendant-sellers were not "aware

of the presence of asbestos or asbestos-containing materials on

the premises."

    ¶9      After       the     plaintiff-buyers       purchased      the     building,

their contractor cut through asbestos-wrapped ducts, dispersing

asbestos       throughout        the    building.           The     plaintiff-buyers

initiated       an    action    against     the      defendant-sellers,        claiming
breach of contract/warranty, violation of Wis. Stat. §§ 895.446

and 943.20, and negligence in failing to adequately disclose

defective conditions including asbestos.                     The plaintiff-buyers

claim    that    the     dispersal     of   asbestos       rendered    the     building

uninhabitable, that the tenants were ordered to vacate, that the

plaintiff-buyers could not continue to finance the property, and

that the building was lost in foreclosure.

                                            II


                                            3
                                                          No.   2011AP2608



     ¶10    This case requires us to interpret the American Family

insurance policy.

     ¶11    The   interpretation    of   an   insurance   policy   is   a

question of law that this court decides independently of the

circuit court or court of appeals, but benefiting from their

analysis.    Bethke v. Auto-Owners Insurance Co., 2013 WI 16, ¶17,

345 Wis. 2d 533, 825 N.W.2d 482; Wadzinski v. Auto-Owners Ins.

Co., 2012 WI 75, ¶10, 342 Wis. 2d 311, 818 N.W.2d 819.

     ¶12    Our goal in interpreting an insurance policy is to

give effect to the intent of the parties.3 The intent of the

parties to an insurance policy is presumed to be expressed in

the language of the policy.4       We interpret the policy's language

according to its plain and ordinary meaning, as understood by a

reasonable person in the position of the insured.5

     ¶13    When determining whether an insurance policy provides

coverage, we look first to the initial grant of coverage.6              If

there is an initial grant of coverage, we then evaluate whether

     3
       Hirschhorn v. Auto-Owners Ins. Co., 2012 WI 20, ¶22, 338
Wis. 2d 761, 809 N.W.2d 529; Estate of Sustache v. Am. Family
Mut. Ins. Co., 2008 WI 87, ¶19, 311 Wis. 2d 548, 751 N.W.2d 845.
     4
       Wadzinski v. Auto-Owners Ins. Co., 2012 WI 75, ¶11, 342
Wis. 2d 311, 818 N.W.2d 819.
     5
       Hirschhorn, 338 Wis. 2d 761, ¶22; Estate of Sustache, 311
Wis. 2d 548, ¶19.

     See also 1 Arnold P. Anderson, Wisconsin Insurance Law
§ 1.27 (6th ed. 2013) ("The standard is what a reasonable person
or lay person would understand the insurance policy to state.").
     6
       Schinner v. Gundrum, 2013 WI 71, ¶37, 349 Wis. 2d 529, 833
N.W.2d 685.

                                    4
                                                                         No.    2011AP2608



the policy's exclusions preclude coverage.7                    Finally, if coverage

has been withdrawn by an exclusion, we then examine whether an

exception to that exclusion reinstates coverage.8

         ¶14    The instant case does not involve the question of the

initial    grant      of   coverage.        Our    review      is   focused      only   on

interpreting         the   asbestos    exclusion        to   determine        whether   it

precludes      coverage.       No     other     exclusion      is   before      us.     No

exceptions to the asbestos exclusion are involved.

     ¶15       A reasonable insured is presumed to understand that an

exclusion in a policy limits coverage.9                       If the effect of an

exclusion       is    uncertain,      it   will    be    construed       in    favor    of

coverage.       Day v. Allstate Indemnity Co., 2011 WI 24, ¶29, 332

Wis. 2d 571, 798 N.W.2d 199.               Language in an insurance policy is

narrowly construed against the insurer "if it is susceptible to

more than one reasonable interpretation."                       Folkman v. Quamme,

2003 WI 116, ¶13, 264 Wis. 2d 617, 665 N.W.2d 857.                         The rule of

narrow     construction       of      an   exclusion         against     the    insurer,

however,       "is   not   applicable      if     the   policy      is   unambiguous."
Whirlpool Corp. v. Ziebert, 197 Wis. 2d 144, 152, 539 N.W.2d 883

(1995).

     ¶16       We review a grant of summary judgment de novo, using

the same methodology as the circuit court.                       Estate of Sustache


     7
         Schinner, 349 Wis. 2d 529, ¶37.
     8
         Id.
     9
       Bulen v. West Bend Mut. Ins. Co., 125 Wis. 2d 259, 263,
371 N.W.2d 392 (Ct. App. 1985).

                                            5
                                                                   No.   2011AP2608



v. Am. Family Mut. Ins. Co., 2008 WI 87, ¶17, 311 Wis. 2d 548,

751 N.W.2d 845.          Summary judgment is proper when the record

demonstrates that there is no genuine issue of any material fact

and that the moving party is entitled to judgment as a matter of

law.    Wis. Stat. § 802.08(2); Estate of Sustache, 311 Wis. 2d

548, ¶17.

                                      III

       ¶17    In   the   present   review,    we   are     asked   to    determine

whether      the   asbestos   exclusion      clause   in    American      Family's

insurance policy precludes coverage for the claims made by the

plaintiff-buyers.

       ¶18    The asbestos exclusion provisions read as follows:

       This insurance does not apply                  to . . . "property
       damage" . . . with respect to:

          a. Any loss arising out of, resulting from, caused
          by, or contributed to in whole or in part by
          asbestos, exposure to asbestos, or the use of
          asbestos. "Property damage" also includes any claim
          for reduction in value of real estate or personal
          property due to its contamination with asbestos in
          any form at any time.

          b. Any loss, cost, or expense arising out of or in
          any way related to any request, demand, order, or
          statutory or regulatory requirement that any insured
          or others identify, sample, test for, detect,
          monitor, clean up, remove, contain, treat, detoxify,
          neutralize, abate, dispose of, mitigate, destroy, or
          any way respond to or assess the presence of, or the
          effects of, asbestos.

              . . . .

          f.   Any supervision, instructions, recommendations,
          warnings or advice given or which should have been
          given in connection with any of the paragraphs
          above.
                                       6
                                                                                      No.    2011AP2608


           g. Any obligation to share damages or repay someone
           in connection with any of the paragraphs above.
      ¶19        We examine each of the plaintiff-buyers' arguments in

turn.

      ¶20        The     plaintiff-buyers                assert           that        the     asbestos

exclusion is ambiguous; American Family asserts it is not.                                          The

plaintiff-buyers contend that because asbestos has a variety of

forms      and    meanings        and    that      because          the    word       "asbestos"     is

undefined in the policy, the exclusion is ambiguous.                                        We are not

persuaded.

      ¶21        In the absence of other language in the policy, and

there      is    none,      a    reasonable        person       in    the        position      of   the

insured would not interpret the word "asbestos" to limit the

clause to certain types of asbestos.                                To a reasonable insured

reading this policy, asbestos in any form is asbestos.

      ¶22        The plaintiff-buyers assert that the broad language of

the        asbestos             exclusion          invites            multiple              reasonable

interpretations             and     should         be        narrowly       construed          against

American Family.10
      ¶23        The   opening      sentence            of    the    exclusion          informs     the

insured that it excludes coverage for "any loss arising out of"

exposure         to    or   the    use        of   asbestos.               We    agree       with   the

plaintiff-buyers            that        the    words         "arising           out    of"    in    the


      10
       "Language in an insurance policy is ambiguous 'if it is
susceptible to more than one reasonable interpretation.'" State
Farm Mut. Auto. Ins. Co. v. Langridge, 2004 WI 113, ¶15, 275
Wis. 2d 35, 683 N.W.2d 75 (emphasis in original; citations
omitted).

                                                   7
                                                                     No.    2011AP2608



exclusion are very broad, general, and comprehensive.                       But they

do have meaning and there are limits.11

       ¶24     The   words    "arising     out    of"   used   in    an    automobile

liability      insurance      policy     "are    commonly    understood         to   mean

originating from, growing out of, or flowing from, and require

that there be some causal relationship between the injury and

the risk for which coverage is provided."12

       ¶25     The plaintiff-buyers maintain that there is a causal

nexus       requirement      in   the   American    Family     policy's      asbestos

exclusion, and that this causal nexus should not be read out of

the exclusion.          We agree with the plaintiff-buyers that the

wording of the exclusion indicates a causal relationship between

the   loss     and   the     asbestos.      The    exclusion    applies         to   loss

"arising out of, resulting from, caused by, or contributed to in

whole or in part by asbestos" (emphasis added).                     Explicit in all

of    those    terms   is     the   requirement     of   some    type      of    causal




       11
       The plaintiff-buyers assert that a broad reading of the
asbestos exclusion excluding any loss caused "in whole or in
part" by asbestos would potentially permit the mere presence of
asbestos to preclude coverage of a loss caused by a source other
than asbestos, such as flood, fire, or wind. We do not address
this hypothetical. The loss in the instant case arose "in whole"
out of asbestos.
       12
        Lawver v. Boling, 71 Wis. 2d 408, 415, 238 N.W.2d 514
(1976).   See also Garriguenc v. Love, 67 Wis. 2d 130, 137, 226
N.W.2d 414 (1975).

                                           8
                                                                           No.     2011AP2608



relationship between asbestos and the loss.13                             In the present

case, a causal nexus exists between the loss claimed and the

asbestos; the loss here arose out of the dispersal of asbestos

throughout the building.

      ¶26       The     plaintiff-buyers         point     out     that        because    the

exclusion does not explicitly state that it applies to losses

that arise out of the "dispersal" or "presence" of asbestos, the

exclusion should not be interpreted as applying to the instant

case in which there was the mere presence of asbestos and the

accidental dispersal of asbestos.

      ¶27       The    plaintiff-buyers        insist      that    a    more     reasonable

interpretation of the asbestos exclusion in the American Family

policy is to limit the exclusion to loss caused by "exposure to"

or   "use       of"    asbestos.       For   support       of     this    argument,       the

plaintiff-buyers rely on Great American Restoration Services.,

Inc. v. Scottsdale Insurance Co., 78 A.D.3d 773 (N.Y. App. Div.

2010), a New York case.

      ¶28       In     Great   American,         as   in    the        instant    case,     a
contractor            caused   the     accidental          dispersal       of      asbestos

throughout a building.               But we agree with the circuit court and

court      of    appeals       that    Great      American        is     not     persuasive

      13
       See, e.g., Lawver, 71 Wis. 2d at 415 (noting that the
words "arising out of" require "some causal relationship between
the injury and the risk for which coverage is provided,"
although the causal connection in an automobile liability
insurance policy between the use of the car and the injuries is
not of the type "which would ordinarily be necessary to warrant
a finding of 'proximate cause' or 'substantial factor' as those
terms are used in imposing liability for negligent conduct.").

                                             9
                                                                           No.    2011AP2608



authority.        The exclusion provision in Great American differs

significantly from the exclusion provision in the present case.

      ¶29    The     asbestos    exclusion        at   issue     in    Great      American

enumerated asbestos-related bodily injury and property damage,

which were excluded from coverage as follows:

      [T]hat coverage does not apply to "bodily injury" or
      "property damage" arising out of the inhal[ation]" or
      "prolonged physical exposure to" asbestos, the "use"
      of asbestos in construction, the "removal" of asbestos
      from products or structures, or the "manufacture,
      sale,   transportation,   storage,  or   disposal"  of
      asbestos or products containing asbestos.14
      ¶30    Because the exclusion clause in Great American failed

to state that "coverage will not be provided for damages arising

out   of    the    unknowing    or    accidental       release        or   dispersal     of

asbestos," the New York Court of Appeals construed the exclusion

in favor of the insured.             Great American, 78 A.D.3d at 777.

      ¶31    The exclusion provision in Great American is crucially

different     from     the    exclusion      provision      in   the       instant   case.

Unlike      the    exclusion     in    Great      American,      American          Family's

asbestos exclusion is written in broad, comprehensive language

including     a    wider     range    of    asbestos-related          losses      than   the

exclusion in Great American.

      ¶32    The plaintiff-buyers assert, among other claims, that

they never would have bought the property and suffered the loss

but for the defendant-sellers' negligent failure to disclose the

possibility       of   asbestos.           They   contend    that      the       defendant-

      14
       Great Am. Restoration Servs., Inc. v. Scottsdale Ins.
Co., 78 A.D.3d 773, 775 (N.Y. App. Div. 2010).

                                             10
                                                                               No.       2011AP2608



sellers' negligent failure to disclose the presence of asbestos

is not covered by the asbestos exclusion and that there is no

causal nexus between their loss and the tort.

      ¶33       Yet,   the    scope       of    the     asbestos      exclusion          does     not

depend     on    the   type        of    tort    from    which     the    loss       arose;        the

exclusion's language concerns the loss itself arising out of

asbestos.        Our analysis focuses on whether the loss suffered by

the     plaintiff-buyers            is     within       the   text       of        the   asbestos

exclusion and thus reasonably contemplated by the parties.

      ¶34       The plaintiff-buyers also assert that the defendant-

sellers negligently failed to disclose defective conditions or

any     other     toxic      or     hazardous          substances      contained            on    the

property that are outside the scope of the asbestos exclusion

and   are       covered   under          the    insurance     policy.              Although       the

plaintiff-buyers             had        complaints       regarding         electrical             and

plumbing issues, nothing in the record demonstrates that the

plaintiff-buyers          sustained            any     loss   related         to     such        other

issues.      Their loss arose from asbestos.
      ¶35       In sum, we are persuaded that a reasonable insured

would      interpret      the      asbestos          exclusion   in      American        Family's

policy to preclude the loss alleged by the plaintiff-buyers.15

      ¶36       For the foregoing reasons, we affirm the decision of

the court of appeals.



      15
       Because the asbestos exclusion precludes coverage of the
claims made by the plaintiff-buyers, we need not evaluate
whether any other exclusions in the policy apply.

                                                 11
                                                     No.   2011AP2608



    ¶37     By the Court.——The decision of the court of appeals is

affirmed.

    ¶38     DAVID T. PROSSER, J., did not participate.




                                 12
    No.   2011AP2608




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