Scott Dhein v. Frankenmuth Mutual Insurance Company

2020 WI App 62

COURT OF APPEALS OF WISCONSIN
PUBLISHED OPINION

Case No.: 2019AP531

Complete Title of Case:

SCOTT DHEIN,

PLAINTIFF,

V.

FRANKENMUTH MUTUAL INSURANCE COMPANY AND CITY CENTRE,
LLC,

DEFENDANTS-THIRD-PARTY
PLAINTIFFS-APPELLANTS,

BEAMACO, LLC, SENTRY INSURANCE, A MUTUAL COMPANY AND
LIBERTY MUTUAL INSURANCE COMPANY,

DEFENDANTS,

V.

ACE AMERICAN INSURANCE COMPANY,

THIRD-PARTY DEFENDANT-RESPONDENT.

Opinion Filed: September 23, 2020
Submitted on Briefs:
Oral Argument: March 4, 2020
JUDGES: Neubauer, C.J., Reilly, P.J., and Davis, J.
Concurred:
Dissented:

Appellant
ATTORNEYS: On behalf of the defendants-third-party plaintiffs-appellants, the cause
was submitted on the briefs of Erik J. Pless and Brian D. Anderson of
Everson, Whitney, Everson & Brehm, S.C., Green Bay.

Respondent
ATTORNEYS: On behalf of the third-party defendant-respondent, the cause was
submitted on the brief of Jacob A. Sosnay of Bascom, Budush & Ceman,
S.C., Germantown.

2
2020 WI App 62

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
September 23, 2020
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.

Appeal No. 2019AP531 Cir. Ct. No. 2016CV293

STATE OF WISCONSIN IN COURT OF APPEALS

SCOTT DHEIN,

PLAINTIFF,

V.

FRANKENMUTH MUTUAL INSURANCE COMPANY AND CITY CENTRE, LLC,

DEFENDANTS-THIRD-PARTY
PLAINTIFFS-APPELLANTS,

BEAMACO, LLC, SENTRY INSURANCE, A MUTUAL COMPANY AND
LIBERTY MUTUAL INSURANCE COMPANY,

DEFENDANTS,

V.

ACE AMERICAN INSURANCE COMPANY,

THIRD-PARTY DEFENDANT-RESPONDENT.
No. 2019AP531

APPEAL from an order of the circuit court for Manitowoc County:
MARK R. ROHRER, Judge. Reversed and cause remanded.

Before Neubauer, C.J., Reilly, P.J., and Davis, J.

¶1 REILLY, P.J. City Centre, LLC (City Centre) and Frankenmuth
Mutual Insurance Company1 appeal from the summary judgment dismissal of City
Centre’s claim for coverage against ACE American Insurance Company (ACE).
ACE is the comprehensive general liability (CGL) carrier for Broadwind, Inc., d/b/a
Tower Tech Systems (Broadwind), one of City Centre’s commercial tenants. City
Centre is an additional insured on the ACE policy pursuant to its lease with
Broadwind. The lease provided contractual indemnification, requiring Broadwind
to hold City Centre harmless for any injury caused in whole or in part by
Broadwind’s negligence. City Centre was sued by Scott Dhein, an employee of
Broadwind, following an accident on September 9, 2013. The accident occurred on
property owned by City Centre but used by Broadwind on a daily basis in the course
of its business. City Centre tendered coverage to ACE. ACE refused to provide a
defense or coverage to City Centre.

¶2 The circuit court granted summary judgment to ACE on the grounds
that any coverage under the ACE policy was excluded as Dhein’s accident did not
occur on premises rented by Broadwind and no evidence existed that Broadwind
was causally negligent for Dhein’s injuries. City Centre argues that the court erred
in granting summary judgment as coverage exists under both the “additional

1
Frankenmuth is City Centre’s insurance carrier. Going forward, we will refer to these
parties collectively as “City Centre.”

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No. 2019AP531

insured” and “insured contract” provisions of the ACE policy and a genuine issue
of material fact exists as to Broadwind’s causal negligence.

¶3 We conclude that the additional insured endorsement provides
coverage to City Centre for liability incurred for bodily injury caused by
Broadwind’s “acts or omissions,” regardless of whether Broadwind is legally
negligent. Even in the absence of our first conclusion, a genuine issue of material
fact would exist as to Broadwind’s causal negligence so as to trigger coverage for
any resulting liability under the additional insured endorsement to the extent, upon
further appeal, negligence is deemed a required element for coverage under the
endorsement. Moreover, Broadwind has coverage under the same policy for certain
contractual indemnification obligations it may owe to City Centre as a result of
Broadwind’s negligence. We also conclude, however, that City Centre cannot
invoke the direct action statute to enforce Broadwind’s rights to that coverage as the
direct action statute only permits an action against a liability insurer to recover
insurance proceeds attributable to a negligence action, and, in this case,
Broadwind’s underlying liability to City Centre can only result from contractual
indemnity.

¶4 We recite the pertinent facts, address negligence and insurance law in
Wisconsin, and analyze the additional insured and insured contract provisions of the
ACE policy and how they apply in this case.

Facts

¶5 City Centre owns a large tract of industrial land referred to as the
“peninsula” in the City of Manitowoc and leases parcels within the peninsula to
various tenants. Broadwind, a wind turbine company, leased three separate parcels
of land on the peninsula from City Centre. Land between the various tenants was

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No. 2019AP531

available for use by the tenants and is described as “common areas” in Broadwind’s
lease. The “common areas” are owned by City Centre, and City Centre is required
to maintain and repair the “common areas.”

¶6 Dhein was operating a snorkel lift on September 9, 2013, when a tire
of the snorkel lift fell into a drainage basin whose grate had become dislodged. The
drainage basin is located in the parking lot, which is adjacent to and between
buildings leased by Broadwind and another tenant. The parking lot is “common
area” land that Broadwind employees used on a daily basis to move tower sections
between their parcels via large forklifts and machines. Broadwind admitted that
their employees’ use of large forklifts and heavy equipment to move tower sections
would occasionally dislodge the grate covering the drainage basin and that
snowplowing would also dislodge the grate “just about every time they plowed
snow until there was a good base.”2 A maintenance manager for Broadwind testified
that the grate was dislodged on a number of occasions prior to Dhein’s accident and
that he or others would replace the grate. The maintenance manager described the
drainage basin area as “somewhat a shared responsibility. The grounds was City
Centre’s responsibility. For a grate being out of place like that, we would just put
it back in place.” Broadwind never notified City Centre that the grate was being
dislodged—or that it was defective—and never asked City Centre to fix the
defective grate.

¶7 The lease between City Centre and Broadwind required Broadwind to
carry a CGL policy with City Centre as an “Additional Named Insured,” insuring
both Broadwind and City Centre “against injury to … person … arising out of the

2
A maintenance manager for Broadwind also “blew his tire” on the open drainage basin
prior to Dhein’s accident.

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No. 2019AP531

use and occupancy of the Premises.” Broadwind was also required by the lease to
“protect[,] indemnify, save, and keep harmless” City Centre “from any and all
claims arising out of or from any accidents or other occurrences on or about the
Premises causing injury … due directly or indirectly to negligent use of the
Premises” by Broadwind or its employees. (Emphasis added.)

¶8 ACE issued the required CGL policy to Broadwind (the ACE policy),
which provided coverage to additional insureds. The ACE policy provided, in
relevant part:

A. Section II – Who Is An Insured is amended to include
as an additional insured the person(s) or organization(s)
shown in the Schedule, but only with respect to liability for
“bodily injury”, “property damage” or “personal and
advertising injury” caused, in whole or in part, by your acts
or omissions or the acts or omissions of those acting on your
behalf:

1. In the performance of your ongoing operations; or

2. In connection with your premises owned by or rented
to you.

Pursuant to the policy language, the coverage for an additional insured extended
only to liability for injuries “caused, in whole or in part, by [Broadwind’s] acts or
omissions” or those acting on behalf of Broadwind. Coverage was further limited
to “acts or omissions” that Broadwind or its actors undertook “[i]n the performance”
of its “ongoing operations” or “[i]n connection with” “premises owned by or rented”
by Broadwind.

¶9 The ACE policy contained standard CGL language indemnifying
Broadwind for any liability it might incur for “bodily injury” caused by an
“occurrence.” It also included a standard contractually-assumed liability exclusion
which read as follows:

2. Exclusions

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No. 2019AP531

This insurance does not apply to:

….

b. Contractual Liability

“Bodily injury” or “property damage” for which the insured
is obligated to pay damages by reason of the assumption of
liability in a contract or agreement. This exclusion does not
apply to liability for damages:

(1) That the insured would have in the absence of the
contract or agreement; or

(2) Assumed in a contract or agreement that is an “insured
contract,” provided the “bodily injury” or “property
damage” occurs subsequent to the execution of the contract
or agreement….

The ACE policy defines “insured contract” as “[a] contract for a lease of premises”
or that “part of any other contract or agreement pertaining to your business … under
which you assume the tort liability of another party to pay for ‘bodily injury’ or
‘property damage’ to a third person or organization.”

¶10 Dhein filed a personal injury lawsuit against City Centre, Beamaco,
LLC,3 and their respective insurers, alleging negligence and safe place violations.
After initial discovery, City Centre filed a Third-Party Summons and Complaint
against ACE, alleging that ACE was liable to City Centre as an additional insured
and under the insured contract exception to the contractually-assumed liability
exclusion referenced above, that ACE was liable for any negligence of Broadwind
employees related to Dhein’s injury, and that ACE owed it a duty of defense.

¶11 As relevant to this appeal, ACE moved for declaratory and summary
judgment, arguing that City Centre did not have coverage. The circuit court granted

3
Beamaco, LLC, also leased property on the peninsula adjacent to the location where
Dhein’s accident occurred. The circuit court dismissed Dhein’s claims against Beamaco by its
February 8, 2019 order. The parties do not challenge this dismissal on appeal.

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No. 2019AP531

summary judgment to ACE on the grounds that any coverage that did exist was
excluded as Dhein’s accident did not occur on premises rented by Broadwind and
no evidence existed that Broadwind was causally negligent for Dhein’s injuries.
The circuit court found that City Centre had constructive notice of the defective
grate given the length of time the grate was being dislodged. City Centre appeals.

Standard of Review and Principles of Insurance Contract Interpretation

¶12 At issue in this case is whether City Centre and Broadwind have
coverage under the ACE policy. Interpretation of an insurance contract is a question
of law that we review de novo. American Family Mut. Ins. Co. v. American Girl,
Inc., 2004 WI 2, ¶23, 268 Wis. 2d 16, 673 N.W.2d 65. In reviewing the ACE policy,
we are guided by the familiar principles that insurance policies are construed as they
would be understood by a reasonable person in the position of the insured, and that
any ambiguities are construed in favor of coverage, and against the insurer who
drafted the policy. See Heineke v. Aurora Healthcare, Inc., 2013 WI App 133,
¶11, 351 Wis. 2d 463, 841 N.W.2d 52. However, we do not interpret insurance
policies to provide coverage for risks that the insurer did not contemplate,
underwrite, or receive a premium. American Girl, 268 Wis. 2d 16, ¶23. In applying
these principles, we follow a three-step process: (1) “we examine the facts of the
insured’s claim to determine whether the policy’s insuring agreement makes an
initial grant of coverage”; (2) if a covered claim is triggered, we then examine
whether any exclusions preclude coverage; and (3) we examine whether any
exception to an exclusion reinstates coverage. Id., ¶24.

¶13 On appeal, our review of a decision on summary judgment is de novo,
applying the same methodology as the circuit court. Id., ¶22. Summary judgment
is appropriate if there are no genuine issues of material fact in dispute and a party is

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No. 2019AP531

entitled to judgment as a matter of law. Id. If there are disputed material facts or
undisputed material facts from which reasonable alternative inferences can be
drawn, then the matter is to be determined by the fact finder at trial. Lambrecht v.
Estate of Kaczmarczyk, 2001 WI 25, ¶¶21-24, 241
Wis. 2d 804, 623 N.W.2d 751; see also Delmore v. American Family Mut. Ins.
Co., 118 Wis. 2d 510, 512, 348 N.W.2d 151 (1984).

¶14 We now address the additional insured and insured contract
provisions of the ACE policy and apply them to the facts presented.

The Additional Insured Endorsement Provides Coverage to City Centre for
Liability It Incurs as a Result of Broadwind’s “Acts or Omissions,” Regardless of
Whether Broadwind is Legally Negligent

¶15 The additional insured endorsement issued to Broadwind makes City
Centre an insured, able to enforce the policy, but only in situations involving
liability it incurs as a result of its relationship with the named insured, Broadwind.
First, City Centre’s liability (or potential liability that might trigger a defense) must
stem from bodily injury caused by an “act[] or omission” of Broadwind, the named
insured. Second, the “act[] or omission” must occur “[i]n the performance of
[Broadwind’s] ongoing operations” or “[i]n connection with [Broadwind’s]
premises owned by or rented to [Broadwind].”

¶16 Our threshold question, then, concerns the interpretation of the phrase
“acts or omissions” in the endorsement. The parties have treated this issue as
involving the question of whether Dhein’s injuries resulted from Broadwind’s
negligence, but we cannot find from the plain language that the endorsement is so
limited, particularly in light of the rules of construction referenced above. The
language simply provides liability coverage to the additional insured for bodily
injury that is “caused in whole or in part by” an “act or omission” of the named

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No. 2019AP531

insured, Broadwind, or those acting on its behalf (such as its employee, Dhein).
This suggests that if some act or omission of Dhein or Broadwind caused Dhein’s
injury then whatever liability might exist on the part of City Centre in contributing
to that injury is covered. Nothing in this language restricts coverage to liability for
the named insured’s negligence or is otherwise “fault-based” as it relates to
Broadwind.

¶17 In reaching this conclusion, we are guided by cases from other
jurisdictions, including a federal case from the Eastern District of Wisconsin
applying Wisconsin law, Ryder Truck Rental, Inc. v. National Fire Ins. Co. of
Hartford, 246 F. Supp. 3d 1231 (E.D. Wis. 2017), in which the court rejected the
notion that the additional insured language requires an element of fault on the part
of the named insured. In Ryder Truck Rental, the plaintiff was an employee of
Rockline Industries, LLC, which had leased a truck from Ryder. Id. at 1233-34.
The employee was injured when he stepped onto a step attached to the truck. Id.
He sued Ryder, claiming that it was negligent in maintaining the step. Id. The lease
required Rockline to provide liability insurance to Ryder, making Ryder an
additional insured with respect to liability it incurred as a result of the “acts or
omissions” of Rockline or its employees. Id. at 1237-38. The insurer denied
coverage, claiming that this language only allowed coverage to Ryder for
Rockline’s negligence. Id. at 1238. The district court disagreed, finding that so
long as the injury arose out of an “act or omission” of Rockline or its employee,
then Ryder was covered, and nothing in the policy language required that the act or
omission be accompanied by fault or negligence:

National argues that Ryder cannot be an “insured” under this
reasoning because the [employee’s] complaint does not
allege that [the employee] was negligent or otherwise at fault
for his injuries; rather, it alleges that Ryder was negligent in
repairing the step. However, while it is true that the

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No. 2019AP531

[employee does] not allege that [the employee’s] own
negligence or other wrongdoing contributed to his injuries,
nothing in the lessor endorsement (or any other part of the
policy) states that a lessor is an “insured” for bodily injury
resulting from acts or omissions of the named insured’s
employee only if the employee’s act or omission was
negligent or otherwise blameworthy. Rather, the
endorsement just says “acts or omissions,” and the policy
does not define these terms at all, much less in a way that
incorporates an element of fault.

Id.

¶18 We agree and adopt this plain language reasoning, which also appears
consistent with how most other courts have construed this language. See, e.g., Arch
Specialty Ins. Co. v. Farm Family Cas. Ins. Co., 238 F. Supp. 3d 604, 613-14
(S.D.N.Y. 2017) (noting that the policy “does not condition coverage on fault by
[the named insured or its employee]; rather “the concept of causation turns on the
relationship of [the named insured or its employee] to the worksite”); Great W. Cas.
Co. v. National Cas. Co., 53 F. Supp. 3d 1154, 1172 (D. N.D. 2014) (“There is no
mention in the language of the endorsement that the acts or omissions must be
‘negligent’ or ‘intentional.’ In other words, fault is not an element.”); PAR Elec.
Contractors, Inc. v. Blueline Rental, LLC, No. 2:16-CV-0246-TOR, 2017 WL
374477, at *24 (E.D. Wash. Jan. 25, 2017) (“Because a plain reading of the
insurance contract covers acts or omissions, not just negligent acts or omissions, the
Court will decline Old Republic’s invitation to insert the word ‘negligent’ into the
contract where it was not provided, especially where that would work to limit the
insured’s coverage and where the insurance company very well could have included
the word ‘negligent’ when drafting the policy.”); see also American Guarantee &
Liab. Ins. Co. v. Norfolk S. Ry. Co., 278 F. Supp. 3d 1025, 1041 (E.D. Tenn. 2017)
(“Here, the phrase ‘caused, in whole or in part,’ is not ambiguous. In effect, it
assigns Norfolk additional insured status if the accident was caused by East Coast’s

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No. 2019AP531

work, act, or omission in some way, even partially. Accordingly, it must be
determined whether East Coast caused the accident.”).4

¶19 In light of these authorities, we conclude that, while City Centre’s
status as an additional insured depends on whether it faces liability for bodily injury
caused by the “acts or omissions” of Broadwind or its employees, the plain language
of the ACE policy does not require a finding of fault/negligence by Broadwind (or
its employees). Dhein is indisputably a Broadwind employee. His injury

4
We note that at least one published decision has reached a contrary conclusion. See
Bacon Constr. Co., Inc. v. Arbella Prot. Ins. Co., Inc., 208 A.3d 595, 600 (R.I. 2019) (“We are
satisfied that the endorsement is fault-based …. [T]he endorsement, by including the terms
‘liability’ and ‘bodily injury caused by’ one’s acts or omissions, includes a negligence trigger.”).
We disagree with Bacon Construction, as the court’s reasoning appears conclusory and lacks an
analysis of why the policy language led to the result reached. Here, had the additional insured
endorsement simply indemnified City Centre for Broadwind’s acts or omissions that result in
liability of the additional insured, the endorsement could possibly be read to require a fault-based
trigger, but that is not what the endorsement says. Rather, City Centre is an additional insured for
any liability it incurs for bodily injury so long as the injury is caused in whole or part by some act
or omission of Broadwind. Nothing requires that the additional insured’s liability be based on any
actionable conduct of the named insured, a point that appears to have been recognized by the
majority of courts addressing this language in the context of injury suffered by the named insured’s
employee.

We acknowledge an unpublished decision from this court which appears to read a
negligence trigger into this policy language, but its analysis as to the issue is lacking. See Ritter v.
Penske Trucking Leasing Co., L.P., No. 2011AP2285, unpublished slip op. ¶23 (WI App Dec. 6,
2012). Ritter’s reference to a negligence trigger was unsupported and made in passing, a point the
PAR Electrical Contractors court noted in denying a reconsideration motion filed in connection
with the decision referenced above. See PAR Elec. Contractors, Inc. v. Blueline Rental, LLC,
No. 2:16-CV-0246-TOR, 2017 WL 2727901, at *2 n.1 (E.D. Wash. Mar. 17, 2017) (“The Ritter
case does not even directly address the issue—rather, it focuses on a lack of an allegation in the
underlying complaint and reasonable expectations—and its conclusion that the policy was limited
to negligence was not explained or supported, contrary to the cases this Court references in its
Order.”). The court in Ryder Truck Rental also noted that whether Ritter actually adopted a
negligence or fault-based trigger “is not clear” but in any event found the case to have “no
persuasive value” on this point since “the court did not give any reasons for reading an element of
fault into the ‘acts or omissions’ language in the lessor endorsement (if in fact it read such an
element into that language).” Ryder Truck Rental, Inc. v. National Fire Ins. Co. of Hartford, 246
F. Supp. 3d 1231, 1239 (E.D. Wis. 2017).

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No. 2019AP531

indisputably occurred as a result of his act of driving over the grate in question. As
a result, City Centre satisfies the “acts or omissions” element as a matter of law and
has coverage under the ACE policy.5

Even If the Additional Insured Endorsement Required a Finding of Negligence by
Broadwind, There is a Genuine Issue of Material Fact as to Whether Dhein’s
Injury was Attributable to any Such Negligence

¶20 As the preceding discussion makes clear, City Centre’s additional
insured status depends on whether its liability is for bodily injury that is caused by
an “act or omission” of Broadwind or its employees, without regard to whether City
Centre’s liability stems from Broadwind’s “negligence.” Nonetheless, because a
negligence trigger for this endorsement was assumed by the parties, and for
purposes of providing guidance in the event of any further review of this matter on
appeal, we deem it appropriate to address the trial court’s summary judgment
finding that there could be no negligence as a matter of law. We conclude that there
are disputed issues of fact on this point, which would have required a trial if this
endorsement were construed to contain a negligence trigger.

5
In reaching this result, we recognize that the lease limits Broadwind’s indemnity
obligations to City Centre for injury “due directly or indirectly to negligent use of the Premises or
any part thereof” by Broadwind. Moreover, the additional insured endorsement expressly states
that the insurance afforded to City Centre will not be broader than what is required by any
contractual provision by which Broadwind is to make City Centre an additional insured. The
combination of these two provisions cannot, however, change the interpretation of the endorsement
because the indemnification provision says nothing about the insurance that Broadwind must
procure covering City Centre. To the contrary, the lease contains an entirely separate insurance
requirement provision, which simply requires Broadwind to procure commercial general liability
insurance insuring both itself and City Centre against injury “arising out of the use and occupancy
of the Premises” without regard to Broadwind’s negligence. This case is thus governed by the
principle that limiting language in an indemnity agreement does not affect coverage under an
additional insured endorsement absent explicit contrary language in either the contract or the
policy—or, put another way, the court must consider the terms of an underlying contract only to
the extent the policy language directs it to do so. See American Cas. Co. v. General Star Indem.
Co., 24 Cal. Rptr. 3d 34, 46-48 (Cal. Ct. App. 2005); In Re Deepwater Horizon, 470 S.W.3d 452,
464 (Tex. 2015).

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No. 2019AP531

¶21 Negligence exists when there is: (1) the existence of a duty of care;
(2) a breach of that duty of care; (3) a causal connection between the duty breached
and the harm caused; and (4) actual loss or damages. Nichols v. Progressive N. Ins.
Co., 2008 WI 20, ¶11, 308 Wis. 2d 17, 746 N.W.2d 220; see also Hocking v. City
of Dodgeville, 2009 WI 70, ¶10, 318 Wis. 2d 681, 768 N.W.2d 552. Wisconsin has
adopted the minority view from Palsgraf v. Long Island Railroad Co., 162 N.E. 99
(N.Y. 1928), that everyone owes a duty to the world at large. Hocking, 318 Wis.
2d 681, ¶12. That duty, however, is not unlimited and “is restricted to what is
reasonable under the circumstances.” Id. In this case, the parties do not dispute that
Dhein was injured and that Dhein incurred an actual loss. We address the remaining
elements of a negligence claim below.

¶22 As everyone owes a duty to the world at large, we begin by accepting
that Broadwind owed a duty of care to Dhein. The duty of care involves two aspects:
the existence of a duty of ordinary care and the assessment of what ordinary care
requires under the circumstances. Id., ¶11. In this case, there is a genuine issue of
material fact as to Broadwind’s duty of care and whether Broadwind breached that
duty. Broadwind knew of the defective grate prior to Dhein’s accident and knew
that its operation of heavy equipment on a daily basis in the vicinity of the grate
would occasionally cause the grate to become dislodged, leaving a hole in the
pavement. Broadwind had notice prior to Dhein’s accident that the hole left by the
dislodged grate had caused damage to one of its employee’s vehicles. Broadwind
acknowledged a “shared responsibility” for maintaining the grate (perhaps because
Broadwind employees were the ones who were dislodging the grate from the
drainage basin with the heavy equipment) and acknowledged that it never informed
City Centre of the defective grate and never asked City Centre to fix the grate. This
could imply that Broadwind accepted the responsibility of making sure the grate

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was on the drainage basin and/or that Broadwind’s acts precluded knowledge on
City Centre’s part. Therefore, Broadwind’s acts and omissions in this case
foreseeably created an unreasonable risk to Dhein and others.

¶23 Furthermore, given Broadwind’s knowledge of the defective
condition of the grate and the fact that Dhein was injured when his snorkel lift fell
into the hole of the drainage basin as a result of the grate being dislodged, a clear
causal connection has been shown between Broadwind’s breached duty and the
harm caused.

¶24 ACE argues that Broadwind cannot be negligent as City Centre cannot
delegate its responsibility to inspect and maintain its premises, citing to Barry v.
Employers Mutual Casualty Co., 2001 WI 101, ¶42, 245 Wis. 2d 560, 630 N.W.2d
517. The circuit court held that City Centre knew or should have known that the
condition of the basin constituted a dangerous condition. The fact that City Centre,
as owner of the common area, also had a duty of care owed to Dhein does not
eliminate Broadwind’s duty.6 While a landowner may not delegate its responsibility

6
Furthermore, and as suggested by the preceding authorities cited supra ¶¶17-18, all of
which involve lawsuits by a named insured’s employee against an additional insured, the fact that
Dhein could not sue Broadwind, his employer, in tort pursuant to Wisconsin’s Worker’s
Compensation Act does not change our analysis of Broadwind’s duty of care under negligence law
or, correspondingly, City Centre’s rights as an additional insured under the ACE policy, which by
its terms directly provides contractual coverage from ACE to City Centre for liability for bodily
injury caused by Broadwind’s acts or omissions.

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No. 2019AP531

under the safe place statute,7 the safe place statute does not extinguish City Centre’s
contractual rights under the ACE policy that ACE will provide coverage for
Broadwind’s acts or omissions. While constructive notice applies to Dhein’s safe
place claim, it does not apply to common law negligence and does not change the
fact that Broadwind owed a duty of care to Dhein. Both City Centre and Broadwind
owed a duty of care to Dhein given the facts presented.

¶25 Accordingly, under Wisconsin’s standard of duty, we have no
hesitation in concluding that based on the evidence, a jury could find that

7
WISCONSIN STAT. § 101.11 (2017-18), the safe place statute, “is a negligence statute that,
rather than creating a distinct cause of action, … instead establishes a duty greater than that of
ordinary care imposed at common law.” Barry v. Employers Mut. Cas. Co., 2001 WI 101, ¶18,
245 Wis. 2d 560, 630 N.W.2d 517. The statute requires that “[e]very employer and every owner
of a place of employment or a public building now or hereafter constructed shall so construct, repair
or maintain such place of employment or public building as to render the same safe.”
Sec. 101.11(1) (2017-18). “Safe” is defined as “such freedom from danger to the life, health, safety
or welfare of employees or frequenters, or the public, or tenants, or fire fighters, and such
reasonable means of notification, egress and escape in case of fire, and such freedom from danger
to adjacent buildings or other property, as the nature of the employment, place of employment, or
public building, will reasonably permit.” WIS. STAT. § 101.01(13) (2017-18). All references to
the Wisconsin Statutes are to the 2017-18 version unless otherwise noted.

“The duties imposed on employers and property owners under the safe place statute are
non-delegable.” Barry, 245 Wis. 2d 560, ¶42. “[T]he person who has that duty [under the safe
place statute] cannot assert that another to whom he has allegedly delegated the duty is to be
substituted as the primary defendant in his stead for a violation of safe place provisions. Under
any circumstance, it is the owner or the employer who must answer to the injured party.” Id.
(alteration in original; citation omitted). Under safe place law, an injured party recovers from
property owners; however, a property owner may seek contribution from other negligent parties.
Id., ¶¶43-44.

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Broadwind was causally negligent, in whole or in part, for Dhein’s accident. 8 The
inferences that could be drawn from the evidence are many, including a finding that
City Centre was negligent in failing to properly inspect its property and that
Broadwind was negligent in failing to give City Centre notice of the known danger
in an area of “shared responsibility” with City Centre.

City Centre Satisfies the Remaining Elements Necessary to Establishing Its Status
as an Additional Insured Under the ACE Policy

¶26 The final step in our analysis of the additional insured provision
concerns the remaining language that must be satisfied before City Centre can be
considered an additional insured. Specifically, the “acts or omissions” that must be
the cause of City Centre’s liability must also occur “[i]n the performance of
[Broadwind’s] ongoing operations” or “[i]n connection with” the premises leased
by Broadwind. Broadwind leased three buildings on the peninsula and there is no

8
We recognize that “even if all the elements for a claim of negligence are proved, or
liability for negligent conduct is assumed by the court, the court nonetheless may preclude liability
based on public policy factors” as “negligence and liability are distinct concepts.” Nichols v.
Progressive N. Ins. Co., 2008 WI 20, ¶19, 308 Wis. 2d 17, 746 N.W.2d 220 (citations omitted).
“The prevalence of a public policy factor analysis, however, does not eliminate consideration of
the four elements of negligence.” Hocking v. City of Dodgeville, 2009 WI 70, ¶11, 318 Wis. 2d
681, 768 N.W.2d 552.

Some of the public policy reasons for not imposing liability
despite a finding of negligence as a substantial factor producing
injury are: (1) The injury is too remote from the negligence; or
(2) the injury is too wholly out of proportion to the culpability of
the negligent tort-feasor; or (3) in retrospect it appears too highly
extraordinary that the negligence should have brought about the
harm; or (4) because allowance of recovery would place too
unreasonable a burden on the negligent tort-feasor; or (5) because
allowance of recovery would be too likely to open the way for
fraudulent claims; or (6) allowance of recovery would enter a field
that has no sensible or just stopping point.

Morgan v. Pennsylvania Gen. Ins. Co., 87 Wis. 2d 723, 737, 275 N.W.2d 660 (1979); see also
Nichols, 308 Wis. 2d 17, ¶¶22-27. While we raised this issue and requested supplemental briefing,
upon review, we do not see that public policy would preclude a negligence claim under the facts
presented here.

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No. 2019AP531

dispute that Dhein’s injury occurred in the common area adjacent to Broadwind’s
leased premises while Dhein was driving the snorkel lift between worksite locations
as part of his regular work activities.

¶27 The circuit court concluded that there was no coverage for City Centre
under the ACE policy as the accident occurred in the common area adjacent to the
leased premises and as Broadwind “is in the business of making turbines, not
maintenance of grates and basins.” We disagree that simply because the accident
occurred in the common area adjacent to the leased premises that there can be no
coverage to City Centre under the ACE policy.

¶28 The phrase “ongoing operations” should not be so narrowly defined
as to require Broadwind to be in the business of “maintenance of grates and basins”
in order for the policy language to apply. We interpret an insurance contract as it
would be understood by a reasonable person in the position of the insured.
American Girl, 268 Wis. 2d 16, ¶23. In interpreting insurance policy language, we
seek to “give effect to the intent of the contracting parties.” Id. The phrase “ongoing
operations” is not defined in the ACE policy. In Mikula v. Miller Brewing Co.,
2005 WI App 92, ¶21, 281 Wis. 2d 712, 701 N.W.2d 613 (citation omitted), this
court determined that “‘[o]ngoing operations,’ … can be understood to mean the
‘doing or performing of a practical work or of something involving practical
application of principles or processes … as a part of a series of actions’ … ‘that is
actually in process.’” In other words, the court explained, the phrase could
“reasonably be interpreted to refer to the ongoing performance of the work”
performed for the additional insured. Id. While the parties in Mikula had contracted
for work to be performed between the parties, and did not involve a lease agreement,
we conclude that the same definition can apply to the work performed by
Broadwind.

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No. 2019AP531

¶29 Broadwind employees, like Dhein, were required to move large
equipment within the common area to perform their work on the leased premises,
and Broadwind utilized the common area between its three parcels in the normal
course of its operations. Case in point, Dhein was operating heavy machinery in the
common area when his accident occurred. Broadwind knew of the hazard posed by
the drainage basin as its own large equipment had previously dislodged the grate,
creating an open hole in the ground, in the course of moving the equipment between
worksites within the leased premises. Further, Broadwind employees would
regularly replace the grate when they noticed it was dislodged, in what an employee
called a “shared responsibility.” Therefore, we conclude that Dhein driving the
snorkel lift between worksites and employees replacing the grate were within the
performance of Broadwind’s “ongoing operations.”

¶30 Second, we conclude that the common area where the accident
occurred was “in connection with” premises rented by Broadwind. The ACE policy
does not define the phrase “in connection with.” The word “connection” is defined
as a “relationship or association in thought (as of cause and effect, logical sequence,
mutual dependence or involvement).” Connection, WEBSTER’S THIRD NEW
INTERNATIONAL DICTIONARY (unabridged ed. 1993); see also Melby v.
Metropolitan Prop. & Cas. Ins. Co., No. 2013AP12, unpublished slip op. ¶15 (WI
App Feb. 12, 2015) (“[T]he word ‘connection’ is defined as ‘a relationship;
association; ... causal relationship.’” (citation omitted)). This definition is similar to
the definition for the phrase “arising out of,” used in liability insurance policies,
which has been read “broadly” and is “commonly understood to mean originating
from, growing out of, or flowing from, and require[s] only that there be some causal
relationship between the injury and the risk for which coverage is provided.” See
Mikula, 281 Wis. 2d 712, ¶21 (alteration in original; citation omitted). Thus, based

18
No. 2019AP531

on those definitions, we read “in connection with” broadly and conclude that there
must be a “causal relationship” between the bodily injury caused, in whole or in
part, by Broadwind’s acts or omissions and the leased premises. Driving large
machinery in the common area between the leased worksites in the normal course
of Broadwind’s operations satisfies that causal relationship. Indeed, given the
separation of the leased buildings and the nature of Broadwind’s operations
requiring them to move large machinery between the buildings, we agree with City
Centre that it would be disingenuous to assert that Broadwind intended to check its
insurance coverage at the door of each building.

City Centre Does Not Have Standing to Assert the Insured Contract Exception
to the Contractually-Assumed Liability Exclusion Under Wisconsin’s Direct
Action Statute

¶31 The second coverage theory asserted in this case pertains to coverage
that might be afforded to Broadwind for City Centre’s contractual indemnification
claim against it for Broadwind’s negligence. City Centre seeks to avail itself of that
coverage by way of Wisconsin’s direct action statute, WIS. STAT. § 632.24. We
start by analyzing Broadwind’s right to coverage and then whether City Centre has
standing to assert those rights under the direct action statute.

¶32 Applying the three-part coverage methodology referenced above,
there can be no question that Broadwind’s potential liability falls within the
coverage grant of the policy: Broadwind is facing potential liability for “bodily
injury” (Dhein’s injuries) caused by an “occurrence” (the alleged accidental
negligence involving the grate discussed above). Broadwind’s liability stems from
the indemnification agreement it entered into with City Centre as Dhein did not (and
per Wisconsin’s worker’s compensation law, could not) sue Broadwind directly.
The second step addresses exclusions, and, in this case, the ACE policy has a
contractually-assumed liability exclusion for “‘[b]odily injury’ or ‘property

19
No. 2019AP531

damage’ for which the insured is obligated to pay damages by reason of the
assumption of liability in a contract or agreement.” We move then to the third step
in the methodology to determine whether an exception restores coverage. The ACE
policy provides that the contractually-assumed liability exclusion does not apply if
the contractually-assumed liability is for damages “[a]ssumed in a contract or
agreement that is an ‘insured contract.’” An “insured contract” is defined by the
policy as “[a] contract for a lease of premises” as well as

[t]hat part of any other contract or agreement pertaining
to [Broadwind’s] business … under which [Broadwind]
assume[s] the tort liability of another party to pay for “bodily
injury” … to a third person or organization. Tort liability
means a liability that would be imposed by law in the
absence of any contract or agreement.”

The lease between Broadwind and City Centre is an insured contract as both a
“contract for a lease of premises” and an agreement in which Broadwind agreed to
assume City Centre’s tort liability to pay for bodily injury.

¶33 In American Girl, our supreme court addressed the “contractually-
assumed liability exclusion” and concluded that where an insured (Broadwind) has
contractually assumed the liability of a third-party (City Centre), such as in an
indemnification or hold harmless agreement, the policy does not exclude coverage
for liabilities the insured is exposed to under the terms of the contracts it makes
generally. See American Girl, 268 Wis. 2d 16, ¶58. Broadwind’s liability is by
virtue of the indemnification/hold harmless provision, which provides:

[Broadwind] agrees that it will at all times protect[,]
indemnify, save, and keep harmless [City Centre] against
and from any and all claims arising out of or from any
accidents or other occurrences on or about the Premises
causing injury to any person or persons or property
(including but not limited to any injuries indirectly or
directly caused by lack of security), whomsoever or
whatsoever and due directly or indirectly to negligent use of
the Premises or any part thereof by [Broadwind], its
employees, agents, or invitees.

20
No. 2019AP531

Broadwind has coverage for this liability because it has coverage under the ACE
policy for “bodily injury” caused by an “occurrence” (accident). Dhein’s accident
occurred “on or about the Premises” in an area of “shared responsibility” “due
directly or indirectly” to Broadwind’s negligence.9

¶34 Our conclusion that Broadwind has coverage for its indemnification
obligations does not necessarily lead to the conclusion that City Centre has the right
to access that coverage under Wisconsin’s direct action statute. Indeed, we
conclude that, under the facts of this case, it cannot. And while this may not make
a difference to ultimate recovery from ACE, in light of our conclusion that City
Centre is an additional insured and therefore has coverage under the ACE policy as
a matter of law, we address the issue to clarify that no similar right exists to sue
ACE directly under Wisconsin’s direct action statute.10

¶35 WISCONSIN STAT. § 632.24 confers standing to sue on a “policy of
insurance covering liability to others for negligence” to any “persons entitled to

9
It is important to note that the coverage for Broadwind’s indemnification obligations,
unlike its coverage under the additional insured provision, is limited to injury caused by
Broadwind’s negligence since, as previously noted, the indemnification agreement is expressly so
limited. Specifically, the indemnification obligation in the lease provides that Broadwind must
indemnify City Centre for injuries “due directly or indirectly to negligent use of the Premises or
any part thereof” by Broadwind.
10
Aside from addressing this issue for the sake of completeness, we note that there are
substantive implications to whether City Centre’s right to seek coverage arises by virtue of its status
as an additional insured versus its right to tap into Broadwind’s coverage under the direct action
statute. First, City Centre’s rights as an insured implicate both ACE’s right and duty to defend, as
opposed to simply a right to seek coverage that Broadwind might have for reimbursement of
defense costs it might be required to pay under its indemnification agreement. Second, per the terms
of the policy, coverage under the insured contract exception to the contractually-assumed liability
exclusion would cause any defense costs paid by ACE to erode the limits of the ACE policy (other
than in certain narrow circumstances we need not delve into here). That is not the case with respect
to defense costs that ACE may be required to fund in defending City Centre as its insured.

21
No. 2019AP531

recover against the insured … for injury to persons … irrespective of whether the
liability is presently established or is contingent.” On its face, the statute appears
applicable: the ACE policy is a “policy of insurance covering liability to others for
negligence” and City Centre is a “person[] entitled to recover” from Broadwind for
“injury to persons.” See § 632.24. As ACE points out, however, our court has
previously held that a direct action under § 632.2411 cannot be brought with respect
to contract claims. See Rogers ex rel. Rogers v. Saunders, 2008 WI App 53, 309
Wis. 2d 238, 750 N.W.2d 477.

¶36 In Rogers, a patient brought a medical malpractice claim against a
health care provider. Id., ¶3. The provider’s liability insurer, who was subrogated
to the provider, filed a third-party complaint, seeking contribution or
indemnification against the liability insurer for the staffing agency that employed
the nurse who had provided care, arguing that it was entitled to proceed directly
against the staffing agency’s insurer under the direct action statute.12 Id. The only
basis for the staffing agency’s liability arose by contractual indemnity owed by the
staffing agency to the health care provider because, this court concluded, any
11
We note that Wisconsin has two direct action statutes, WIS. STAT. §§ 632.24 and
803.04(2). The former is often described as “substantive”; the latter “procedural.” Decade’s
Monthly Income & Appreciation Fund v. Whyte & Hirschboeck, S.C., 164 Wis. 2d 227, 232-35,
474 N.W.2d 766 (Ct. App. 1991). The parties do not appear to address § 803.04.
12
The clause at issue in the agreement between the staffing company and the health care
provider read:

Contractor agrees to indemnify and hold harmless the Client,
its officers, agents, directors, trustees, and employees from claims
and liabilities (including reasonable attorneys’ fees and expenses
incurred in the defense thereof) relating to any property damage,
personal injuries or death (“Damages”) arising out of its [sic] acts
or omissions of Contractor in connection with Contractor’s duties
and services provided under this Agreement.

Rogers ex rel. Rogers v. Saunders, 2008 WI App 53, ¶7, 309 Wis. 2d 238, 750 N.W.2d 477
(alteration in original).

22
No. 2019AP531

separate claim against the nurse or her insurer for negligence was statutorily
precluded under a liability limitation contained in WIS. STAT. § 655.23(5) (2005-
06). This limitation, we concluded, was fatal to the provider’s insurer’s effort to
invoke the direct action statute against the staffing company’s insurer since that
statute “allows direct actions against a negligence insurer for negligence claims. It
does not allow a plaintiff in a contract action to sue the defendant’s insurer.”
Rogers, 309 Wis. 2d 238, ¶8.

¶37 Despite some superficial distinctions, Rogers’ overriding premise is
on all fours with this case. Because Dhein is an employee of Broadwind, he has no
claim against Broadwind for negligence pursuant to the worker’s compensation bar
in WIS. STAT. § 102.03(2). Likewise, Wisconsin precedent holds that the worker’s
compensation bar applies to common law contribution claims that third- party
defendants might assert against the injured party’s employer for the employer’s
negligence. See Mulder v. Acme-Cleveland Corp., 95 Wis. 2d 173, 177-78, 290
N.W.2d 276 (1980). Thus, City Centre has no claim of negligence against
Broadwind; the only potentially viable claim it could have that might trigger an
exception to the contractually-assumed liability exclusion is for contractual
indemnity, and, in fact, that is the only exception it has asserted. 13 Suffice it to say
that such a claim does not allow the indemnified party to file a direct action against

13
The contractually-assumed liability exclusion contains a separate carve-out for “liability
that would be imposed by law in the absence of any contract or agreement.” The worker’s
compensation bar, as extended to third-party contribution claims by Mulder v. Acme-Cleveland
Corp., 95 Wis. 2d 173, 290 N.W.2d 276 (1980), precludes the applicability of this exception.

We note that a claim for contractual indemnity by City Centre against Broadwind itself is
not barred, although City Centre has not asserted such a claim. See Schaub v. West Bend Mut.,
195 Wis. 2d 181, 183, 536 N.W.2d 123 (Ct. App. 1995); see also Larsen v. J. I. Case Co., 37 Wis.
2d 516, 520, 155 N.W.2d 666 (1968).

23
No. 2019AP531

the indemnitor’s insurer in light of our holding in Rogers, to which we are bound.
We therefore conclude that, while Broadwind’s indemnity obligations encompass
City Centre’s alleged negligence, and the ACE policy covers Broadwind’s
indemnity obligations, City Centre has no standing to seek that coverage under WIS.
STAT. § 632.24.14

Conclusion

¶38 ACE agreed, per the additional insured endorsement in its policy with
Broadwind, to cover City Centre with respect to liability for bodily injury caused in
whole or part by “acts or omissions” of Broadwind or those acting on its behalf.
Dhein’s accident was at least partially caused by the “acts or omissions” of
Broadwind or one acting on its behalf, namely Dhein. That the accident occurred

14
ACE contends that even if City Centre is an additional insured, coverage is precluded
by late notice of the accident and resulting claim. We do not address ACE’s argument that City
Centre failed to give timely notice of the claim or whether ACE was prejudiced by such failure as
these are issues that should be addressed by the trial court on remand. We do note that the policy’s
notice of occurrence provision applies only to the named insured and any failure to provide such a
notice cannot be attributed to the additional insured. In contrast, the policy separately requires that
the named insured “and any other involved insured must … immediately send [ACE] copies of any
demands, notices, summonses or legal papers received in connection with the claim or ‘suit.’”
From the record, it appears that the third-party suit against ACE was the first notice of the incident
or any claim arising therefrom and that this suit was filed approximately fourteen months after
Dhein’s original suit against City Centre. The questions on notice will therefore be when was it
reasonably possible for City Centre to provide notice and whether notice of the claim was provided
as soon as reasonably possible, and if it was not, whether ACE was prejudiced by the fourteen-
month delay in providing notice. See WIS. STAT. § 632.26. In addressing this issue, factual
questions will need to be resolved concerning, among other things, when City Centre first became
aware of the incident and any claim against it, when it became aware of the policy at issue sufficient
to allow it to provide such notice, and whether the insurer was prejudiced by any late notice of the
claim.

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No. 2019AP531

on premises owned by City Centre does not preclude such coverage.15 We make
clear that ACE’s coverage obligation stems from the additional insured provision,
and not from the insured contract provision, since the direct action statute does not
permit City Centre to seek insurance coverage separately available to Broadwind
for liability that exists under contract. We reverse and remand for proceedings
consistent with this decision.

By the Court.—Order reversed and cause remanded.

15
The parties do not address any issues concerning ACE’s duty to defend, and to the extent
this is an issue, it would need to be addressed on remand. We note that any such duty would not
arise unless and until the underlying suit was tendered to ACE, and this would preclude recovery
of pre-tender defense costs. See Towne Realty, Inc. v. Zurich Ins. Co., 201 Wis. 2d 260, 271, 548
N.W.2d 64 (1996) (“Zurich had no duty to defend until it had been put on notice that there was a
claim against the Insureds.”).

2