Recent Decisions Impacting the Independent Concurrent Cause Rule

WDC Journal Edition: Spring 2011
By: Erik L. Fuehrer, Gabert, Williams, Konz & Lawrynk, LLP

Introduction

There have been a number of appellate cases in recent years in which the insured has argued in favor of insurance coverage pursuant to the interpretive doctrine known as the Independent Concurrent Cause Rule (the “Rule”). As the Rule has become untethered from its initial context and purpose, some recent decisions have struggled with its correct application. This article seeks to aid any practitioner who is faced with this coverage issue.

It is well-settled law that when interpreting a policy of insurance to determine the existence of coverage, once an exclusion is found that precludes coverage, the inapplicability of another exclusion will not reinstate coverage.[1] Consequently, where there is an occurrence, but the cause of that occurrence is an excluded risk under a policy, coverage does not exist, even if the same cause could arguably be interpreted as a covered risk elsewhere in the same policy. This general exclusionary doctrine is usually applied to cases where there is only one cause of the occurrence in question.

The Rule was developed as an exception to the above-noted exclusionary doctrine. The exception was designed to apply to an occurrence which has two separate and independent causes, one of which is an excluded risk, and the other of which is a covered risk. The purpose is to protect the insured who has paid premiums for a covered risk in those situations where a separate excluded risk independently caused the same occurrence. The Rule holds that, for coverage to exist as an exception to the general exclusionary doctrine, “an independent concurrent cause must provide the basis for a cause of action in and of itself and must not require the occurrence of the excluded risk to make it actionable.”[2]

For example, assume that the driver of a vehicle was transporting a loaded rifle.[3] Additionally, assume that, prior to transporting the rifle, the driver had modified its trigger to create a "hair trigger," allowing the weapon to more easily discharge. Finally, assume the rifle discharges, injuring a passenger while the driver was transporting it in his vehicle. Under the driver’s homeowners policy, an occurrence arising out of the use of a motor vehicle would be excluded. Yet, the policy does provide coverage for other risks, such as negligently modifying the trigger on the rifle. Under the exclusionary doctrine, coverage would not exist. The Rule, however, states that coverage does exist in this situation because the modification of the trigger was a risk separate and independent from the excluded risk of motor vehicle use.

While the Rule’s formulation and purpose appear to be straightforward, its application has engendered confusion in recent years.

Initial Context and Purpose for the Independent Concurrent Cause Rule

One of the early Wisconsin applications of the Rule is the Wisconsin Supreme Court’s decision in Lawver v. Boling, in 1976.[4] The Lawver case is typical of the types of cases where this Rule is most often applied, namely, cases involving damages caused by a motor vehicle, with the insured seeking coverage under a homeowners or CGL policy that excludes coverage arising from such motor vehicle use.

In Lawver, the plaintiff brought a claim for personal injuries which occurred on his father-in-law’s farm.[5] The injuries in Lawver were allegedly caused by both the negligent use of a vehicle and negligent construction of a platform.

Specifically, the plaintiff’s injuries were the result of a misguided attempt to create a lift platform from which the plaintiff could nail some boards over an opening in his father-in-law’s barn.[6] The wooden lift platform was connected to a pulley on the barn with its other end tied to a pickup truck.[7] At some point during the operation of the lift, the rope snapped, and the plaintiff fell to the ground, sustaining injuries.[8]

The insurer moved for summary judgment on the basis that the accident arose out of the use of a vehicle and its policy excluded such a risk.[9] The plaintiff argued that the accident was the result of negligence in constructing the lift, which risk was arguably covered by the all-risk CGL policy. The circuit court granted the insurer’s summary judgment motion.[10] In overturning the circuit court, the Wisconsin Supreme Court reasoned that the insurer “should not be excused from its obligation to defend the action or pay benefits until it has been determined that the injuries did not result, even in part, from a risk for which it provided coverage and collected a premium.”[11]

Several subsequent appellate decisions applying the Rule upheld the Lawver court’s reasoning.[12] Significant among these decisions is Bankert v. Threshermen’s Mut. Ins. Co., in which the Wisconsin Supreme Court clarified that the application of the Rule is dependent on the risks insured against in a policy, not tort theories of liability.[13] In Bankert, a minor child, Mueller, crashed a motorcycle into a parked car, injuring his passenger, Bankert.[14] Bankert’s parents brought suit against Mueller’s parents for “negligent entrustment” and “negligent supervision.”[15] At the time of the accident, the Muellers were insured under a farmowners policy.[16]

The Wisconsin Supreme Court held that the policy did not provide coverage pursuant to either theory of negligence.[17] The court explained that a claim for negligent entrustment is not actionable without the negligent use by the entrustee.[18] The Bankert court further noted that claims for negligent entrustment and negligent failure to control are more properly denominated as theories of liability and not as stand-alone claims. Additionally, the court explained that insurance policies do not insure against theories of liability, but rather, they insure against occurrences which cause injury.[19] Thus, the application of the Rule is dependent on the risks insured against in a policy, not tort theories of liability. For the Rule to extend coverage, there must be an independent cause arising from a covered risk, not from a separate theory of liability.


The Rule Becomes Less Clear

In 2009, the Wisconsin Court of Appeals decided Jones v. Smith.[20] The Jones decision represents a troubling anomaly in the application of the Rule. Instead of applying the Rule by examining the covered and excluded "risks" under a policy, the Jones court compared and considered theories of negligence. The result was a radical change in the application of the Rule and an expansion of coverage under the policy.

In Jones, a child died due to hyperthermia when she was left in a day care center’s van, which had transported her to the day care on a hot summer day.[21] The estate of the child brought a claim against the day care center for the negligence of its employees in failing to look for the child.[22] The day care center had a CGL policy which contained a motor vehicle use exclusion.[23]

While the Jones court correctly stated the conditions for application of the Rule, it failed to follow these precepts in its decision. Rather, the court in Jones stated that the negligence of the center’s staff did not require the use of an automobile to be actionable, because “[the driver’s] negligence, although it preceded the negligence of the staff, did not contribute to the staff’s alleged negligence. Their duty was separate and independent of [the driver’s] actions.”[24]

Yet, the test of whether the Rule extends coverage under a policy is not whether one negligent act contributed to another negligent act. Rather, the test, as recognized but not applied by the Jones court, is whether there are two independent “causes,” one of which provides coverage: “The independent concurrent cause must provide the basis for a cause of action in and of itself and must not require the occurrence of the excluded risk to make it actionable.”[25]

The facts in Jones demonstrate how a shift to theories of negligence affects the question of coverage. The key fact is that the girl would not have died of hyperthermia if she had not been left in an overheated vehicle on a summer day. The girl would not have died of hyperthermia due to the overheated interior of a vehicle if she had been left somewhere outside of the vehicle, such as on a playground. Thus, the vehicle—the excluded risk—was instrumental in her death. Under the original formulation of the Rule, the staff’s failure to look for the girl would not be an independent concurrent cause because it requires the excluded risk to make it actionable.

Additionally, as noted above, the original purpose of the Rule was to act as an exception to the general exclusionary rule. By failing to require two independent causes, the Jones decision eliminated the basis for the Rule as an exception to the general exclusionary rule.


Application of the Rule Post-Jones

In 2010, the court of appeals decided three cases which examined the Rule.[26] One of these decisions, Flejter v. West Bend Mut. Ins. Co., highlights the court of appeals’ attempt to reconcile the earlier formulation of the Rule with its application in Jones.

The Flejter case confirms the appropriate application of the Independent Concurrent Cause Rule, and in doing so, casts doubt upon the continued viability of the Jones decision. The Flejter case involved fatalities arising out of a motor vehicle accident caused by a drunk driver.[27] At the time of the accident, the drunk driver was driving a work van entrusted to him by his employer.[28] The plaintiffs alleged that the employer was negligent in its hiring, supervision, and retention of a known drunk driver as an employee, and sought recovery under the employer’s CGL policy.[29] The CGL policy, however, excluded coverage for an occurrence arising out of the use of a motor vehicle.[30] The court of appeals confirmed that the Rule did not extend coverage because there was no independent cause without the use of the motor vehicle (an excluded risk): “the negligence vel non of Chapp [the employer] in connection with him letting Keck [the drunk driver] drive the van or drive it while drunk could not have caused the accident by itself.”[31]

In attempting to reconcile the Jones decision, however, the Flejter court misstated the key fact in the prior case. The Flejter court mistook the cause of death in Jones for hypothermia due to the child being left in a van in winter, when the actual cause of death in Jones was hyperthermia due to the child overheating by being left in the van in the summer.[32] This is significant because death by hypothermia would be an independent concurrent cause and the case could be reconciled with the prior decisions applying the Rule. If the cause of death was due to hypothermia, the van would not have been instrumental to the child’s death due to the cold. The child would have died of hypothermia in winter whether left in a van or left outside on a playground. Whereas, in summer, the overheating van was the instrumentality that caused the child’s death by hyperthermia. If the child had been left on a playground in summer, the child would not have died of hyperthermia. Thus, the van was the instrumentality that caused the death in Jones and there was no other independent cause of the child’s death that did not require the occurrence of the overheating vehicle to make it actionable. Thus, the Flejter court’s mistake of the underlying facts in Jones helps to emphasize the confusion engendered by that decision.

Another recent court of appeals decision applying the Rule is American Family Mut. Ins. Co. v. Schmitz.[33] In Schmitz, a home being repaired collapsed following a heavy rain storm.[34] The homeowner alleged that the collapse was caused by a contractor’s faulty workmanship which caused water to build up under the home and eventually washed out the foundation, leading to the home’s collapse.[35] The homeowner further alleged that if the contractor had constructed a retaining wall, the water build up and collapse could have been prevented.[36]

The homeowner policy in question in Schmitz contained coverage for collapse caused by faulty workmanship, but also contained an exclusion for damage caused by water.[37] Applying the Rule to these factual allegations, the Schmitz court held that the faulty workmanship was not an independentcause because “the covered risk (defective methods of construction) clearly would not have been actionable without the occurrence of the excluded risk (surface water washing out the earth underneath the home).”[38] Consequently, the court concluded that “[d]efective methods of construction did not really cause the damage so much as it caused a failure to prevent it.”[39] Thus, the Schmitz decision returned to one of the Rule’s main tenets, namely, that any independent concurrent cause must provide the basis for a cause of action in and of itself and must not require the occurrence of the excluded risk to make it actionable.

The third recent case involving the Rule is Siebert v. Wisconsin American Mutual Insurance Company.[40] The Siebert decision highlights the continued confusion regarding the proper application of the Rule. In Siebert, a family member, who was covered under an automobile liability policy, lent a vehicle to a third person to run an errand.[41] This third person, however, exceeded the scope of permission by picking up another person and heading to a party.[42] On the way to the party, the vehicle was involved in an accident.[43]

The passenger in the vehicle brought a claim for negligent entrustment against the family member who lent the vehicle.[44] In holding that coverage existed, the Siebert court stated that the Rule was inapplicable to the case, reasoning as follows: “[the driver’s] own negligence may be excluded from coverage, but the risk associated with [the family member] lending her car to him is not. The rule therefore does not apply here.”[45] Yet, if the Rule does not apply, then the general exclusionary doctrine would apply, and since an acknowledged excluded risk caused the accident, coverage would not exist. The Siebert decision made no mention of the general exclusionary doctrine. Adding to the confusion regarding the Rule’s application was the apparent understanding of the court that the insurer was using the Rule as an affirmative defense to restrict coverage as opposed to an interpretive device that extends coverage.[46] At the time of this writing, the Siebert case has been accepted for review by the Wisconsin Supreme Court and is awaiting a decision by that court.[47]

The Siebert decision demonstrates the need to place the Rule in its proper context, which is as an exception to the general exclusionary doctrine. Where the Rule is found to be inapplicable, the exclusionary doctrine functions to deny coverage. When untethered from its proper context, however, the Rule fails to fulfill its interpretative purpose.



Conclusion

The Independent Concurrent Cause Rule was developed as an exception to the general exclusionary doctrine and was designed to apply to an occurrence which was concurrently caused by two separate and independent causes, one of which was an excluded risk, and the other of which was a covered risk. Although some confusion of the Rule’s application has been engendered by the court of appeals' decision in Jones, a careful analysis of the Rule’s original purpose and context should assist the practitioner with the Rule’s proper application.


[1] American Family Mut. Ins. Co. v. American Girl, Inc., 2004 WI 2, ¶ 24, 268 Wis. 2d 16, 673 N.W.2d 65 (citing Silverton Enters. v. Gen. Cas Co., 143 Wis. 2d 661, 422 N.W.2d 154 (Ct. App. 1988)); see also Stuart v. Weisflog's Showroom Gallery, Inc., 2008 WI 86, ¶ 66, 311 Wis. 2d 492, 753 N.W.2d 448.

[2] Smith v. State Farm Fire & Cas. Co., 192 Wis. 2d 322, 332, 531 N.W.2d 376 (Ct. App. 1995).

[3] State Farm Mut. Automobile Ins. Co. v. Patridge, 514 P.2d 123 (Cal. 1973).

[4] Lawver v. Boling, 71 Wis. 2d 408, 238 N.W.2d 514 (1976).

[5] Id. at 410.

[6] Id. at 411.

[7] Id.

[8] Id.

[9] Id. at 412.

[10] Id. at 413.

[11] Id. at 422.

[12] See Bankert v. Threshermen’s Mut. Ins. Co., 110 Wis. 2d 469, 329 N.W.2d 150 (1983); Smith v. State Farm Fire & Cas. Co., 192 Wis. 2d 322, 531 N.W.2d 376 (Ct. App. 1995).

[13] Bankert, 110 Wis. 2d at 478.

[14] Id. at 472.

[15] Id.

[16] Id.

[17] Id. at 473.

[18] Id. at 476-77.

[19] Id. at 478.

[20] Jones v. Smith, 2009 WI App 88, 320 Wis. 2d 470, 768 N.W.2d 245.

[21] Id., ¶ 2.

[22] Id., ¶ 6.

[23] Id., ¶¶ 1, 4.

[24] Id., ¶ 9.

[25] Id., ¶ 5.

[26] American Family Mutual Insurance Company v. Schmitz, 2010 WI App 157, ___ Wis. 2d ___, 793 N.W.2d 111; Flejter v. West Bend Mut. Ins. Co., 2010 WI App 174, ___ Wis. 2d ___, ___ N.W.2d ___; Siebert v. Wisconsin American Mutual Ins. Co., 2010 WI App 94, 325 Wis. 2d 740, 787 N.W.2d 54.

[27] Flejter, 2010 WI App 174, ¶ 2.

[28] Id.

[29] Id.

[30] Id., ¶ 3.

[31] Id., ¶ 15 (emphasis in original).

[32] Id., ¶ 8.

[33] American Family Mutual Insurance Company v. Schmitz, 2010 WI App 157, ___ Wis. 2d ___, 793 N.W.2d 111.

[34] Id., ¶ 1.

[35] Id., ¶ 2.

[36] Id.

[37] Id., ¶ 3.

[38] Id., ¶ 26.

[39] Id., ¶ 26 (emphasis in original).

[40] Siebert v. Wisconsin American Mutual Ins. Co., 2010 WI App 94, 325 Wis. 2d 740, 787 N.W.2d 54.

[41] Id., ¶ 2.

[42] Id.

[43] Id.

[44] Id., ¶ 3.

[45] Id., ¶ 11.

[46] Id., ¶ 11 n.2.

[47] Siebert v. Wisconsin American Mutual Ins. Co., 2010 WI 125, 329 Wis. 2d 372, 791 N.W.2d 380 (granting petition for review).