BENCH BLOG: Concurrence stated it best in high court decision

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A decision at the end of its last term divided the Wisconsin Supreme Court several ways.

In Schinner v. Gundrum, a majority of the court determined that the young-adult host of an underage drinking party had reason to know that “something undesirable” could happen. Thus a guest-on-guest assault was not an occurrence under his homeowner’s policy.

But the decision was not unanimous, resulting in a dissent and concurrence.

The underage drinking party

Michael Gundrum, 21, who lived with his parents, decided to have a drinking party similar to other ones he’d had. Of the 40 guests, nearly half were underage.

The party was held in a large shed on the property of Gundrum Trucking. The shed had couches, chairs, a table, refrigerator, CD player and ping pong table. Gundrum provided liquor as did some of his guests, and beer pong was played during the party.

One of the underage drinkers, Matthew Cecil, was known to become belligerent and aggressive when intoxicated. True to form, he began taunting another guest, Marshall Schinner, who asked Gundrum for help in managing him.

The bullying continued and Schinner left the shed, at which point Cecil assaulted him. Schinner’s injuries resulted in quadriplegia.

Trial court proceedings

Schinner sued Gundrum in negligence hoping to invoke coverage under the Gundrums’ homeowner’s policy. The insurer, West Bend Insurance Co., asked for the coverage issue to be decided before the liability issues.

In a summary judgment motion, West Bend asserted there was no occurrence triggering coverage because there was no accident; Gundrum’s actions in hosting the party were intentional. West Bend further asserted that if coverage was found, it was excluded by the non-insured location exclusion.

This exclusion bars coverage for “bodily injury … arising out of a premises … owned by an insured … that is not an ‘insured location.’”

West Bend argued that the senior Gundrums’ storage of snowmobiles – property covered by their homeowner’s policy – in the shed on Gundrum Trucking property didn’t convert the shed into an insured location under the homeowner’s policy.

Washington County Circuit Judge James Pouros agreed with West Bend, ruling that Gundrum’s action in providing alcoholic beverages to underage persons was intentional, and that even if there was an occurrence triggering coverage, Schinner’s injury did not occur at an insured location.

Court of Appeals decision

In Schinner v. Gundrum, the District IV Court of Appeals reversed in a unanimous, published decision authored by Judge Brian Blanchard. Significantly, the court focused on the assault, not on Gundrum’s actions, in deciding whether there was an occurrence.

It reasoned that although the assault involved Cecil’s intentional conduct, it was accidental from the standpoint of either Schinner, the third party, or Gundrum, the insured, since neither one intended the assault or the injury.

Having found coverage, the court next looked at the non-insured location exclusion. It interpreted the exclusion as requiring that the injury arise from a condition of the premises. Since Cecil’s assault was not connected to a condition of the shed, the court concluded that the exclusion did not apply.

Supreme Court decision

In a four-person majority decision authored by Justice David Prosser, the Supreme Court reversed the Court of Appeals. It first clarified that the question of whether there was an occurrence must be viewed from the perspective of the insured, not the injured party.

Then, in contrast to the Court of Appeals, the Supreme Court focused on Gundrum’s actions, not the assault.

His actions in hosting the party, including “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.”

Despite relying on an insurance treatise defining an occurrence as “an accident … neither expected nor intended from the standpoint of the insured” the court determined that Gundrum’s intentional, wrongful acts created a “direct risk of harm.”

In addition, the majority noted that there is “strong public policy” against finding an occurrence and coverage in this case. Coverage would allow Gundrum to escape responsibility for his illegal actions and send the wrong message that the cost of tragic results at underage drinking parties can be shifted to insurers.

Lastly, although not required, the court took up the non-insured location exclusion because the Court of Appeals published an analysis of it. Rejecting that interpretation, the majority concluded that it would be absurd to allow business owners to store personal items on business property and thereby obtain insurance coverage under a homeowner’s policy rather than through a business policy.

The dissent weighs in

The dissent, written by Justice Ann Walsh Bradley, sharply criticized the majority’s reasoning, accusing the majority of ignoring the assault and instead focusing on “remote theories of legal causation.”

Precedent cited by the majority established that a third party’s intentional act can constitute an occurrence if the injury is unexpected and unintended. Yet the majority never explained why the assault was not an occurrence, given that Gundrum did not expect or intend the injury to Schinner.

Instead the majority merely indicated that Gundrum should have anticipated that “something undesirable, like a fight, might happen.”

Wisdom in the concurrence

In a one-page concurrence Justice Patrick Crooks fashioned a third approach. He would have found an occurrence in the assault and therefore joined that part of the dissent.

But he agreed with the majority’s analysis of the non-insured location exclusion over the dissent’s argument that there should be “floating” homeowner’s coverage.

In my view, the concurrence best states what the outcome of the case should have been. Although the reasoning of both the majority and the dissent isn’t easy to capture, it’s clear that the majority disregarded the assault as a possible occurrence.

Moreover, while Cecil’s known tendencies are indeed concerning, the majority’s opinion is broader than the facts of this case because it bolsters its opinion with public policy against coverage for underage drinking parties. It does so despite availability of a standard exclusion for such parties as well as exclusions for intentional and illegal acts.

In all events, a calamitous event with devastating consequences was uninsured.