Somerset Condominium Association, Inc. v. RC Somerset, LLC

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.
August 20, 2025
A party may file with the Supreme Court a
Samuel A. Christensen 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. 2024AP1098 Cir. Ct. No. 2022CV740

STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT II

SOMERSET CONDOMINIUM ASSOCIATION, INC.,

PLAINTIFF-APPELLANT,

V.

RC SOMERSET, LLC AND LAKESIDE LIVING, LLC,

DEFENDANTS-RESPONDENTS,

MARTY CLESS AND STEVE GREENBERG,

DEFENDANTS,

CANYON CUSTOM HOME BUILDERS, INC., D/B/A
CANYON DEVELOPMENT GROUP,

INTERVENING PLAINTIFF-RESPONDENT,

ERIE INSURANCE EXCHANGE,

INTERVENING DEFENDANT-RESPONDENT.
No. 2024AP1098

APPEAL from an order of the circuit court for Walworth County:
PHILLIP A. KOSS, Judge. Reversed and cause remanded.

Before Neubauer, P.J., Gundrum, and Grogan, JJ.

¶1 NEUBAUER, P.J. Somerset Condominium Association, Inc.
(Somerset) appeals from an order granting in part a motion for
declaratory/summary judgment filed by its insurer, Erie Insurance Exchange
(Erie). Erie issued a policy of insurance to Somerset containing several forms of
coverage, including as relevant here a Directors and Officers (D&O) Liability
Form. The circuit court concluded that a “Prior Notice” exclusion in the D&O
Liability Form barred coverage for counterclaims asserted against Somerset by
several parties in this case. We reverse.

¶2 The Prior Notice exclusion bars coverage for “[a]ny liability arising
out of the facts alleged, or to the same or related ‘wrongful acts’ alleged or
contained in any ‘claim’ which has been reported, or in any circumstances of
which notice has been given, under” a prior insurance policy. We conclude that
this exclusion does not bar coverage with respect to two of the counterclaims
asserted against Somerset in this case—tortious interference and slander of title—
because Somerset’s potential liability for those counterclaims does not arise out of
related “wrongful acts” alleged in a prior lawsuit filed against Somerset in which
Erie had provided a defense under a different policy. Based upon our analysis and
application of the exclusion, we conclude that the circuit court erred in reaching a
contrary conclusion.

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BACKGROUND

¶3 Somerset is a Wisconsin corporation that was formed in 1977 to
manage a condominium property located in Lake Geneva, Wisconsin. Under the
declaration for the Somerset Condominium and an addendum thereto, certain units
within the condominium were designated for multi-family residential buildings.
At various times, these units were owned by members of the Cless family or RC
Somerset, LLC (RC Somerset), of which Marty Cless (Cless) is the manager.
From 1996 to 2016, the owners of these units leased them to Somerset; the lease
terms specified that the units were to remain vacant and undeveloped. In 2015,
Somerset decided not to renew the lease when it expired in April 2016.

¶4 In 2017, Cless contacted Somerset about possibly purchasing the
units. Somerset’s board of directors considered the proposal but ultimately
decided to pass. Two years later, in April 2019, Cless entered into agreements to
sell the units to Canyon Custom Home Builders, Inc. (Canyon Home Builders).
Steve Greenberg is the President of Canyon Home Builders; the company later
assigned one of the agreements to his wife, Sheri Greenberg. The agreements
were conditioned upon Canyon Home Builders obtaining approval from Somerset
to build multi-family developments on the units within sixty days. The
condominium declaration gave Somerset the right to purchase Cless/RC
Somerset’s units on the same terms as Canyon Home Builders. In May 2019 and
April 2020, Somerset executed one-year waivers of that right.

¶5 At Somerset’s May 11, 2019 annual meeting, the board of directors
learned of the proposed sales and indicated that an “Architectural Committee”
would review the designs for the multi-family buildings.

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¶6 At the time of the proposed sales to Canyon Home Builders,
Somerset had a set of Design Review Guidelines for residential buildings that it
initially adopted in 1997 and later amended in 2006 and 2012. Each iteration of
the guidelines provided for the creation of the committee to review and approve
building plans. Between June 2019 and June 2020, Canyon Home Builders
submitted to the committee multiple sets of plans for the multi-family buildings it
intended to build. The committee did not approve any of the plans because, in its
view, they did not conform in certain respects to the guidelines.

¶7 In August 2020, Canyon Home Builders and Sheri Greenberg filed a
lawsuit against Somerset in the United States District Court for the Eastern District
of Wisconsin (the Federal Lawsuit). In their complaint, Canyon Home Builders
and Greenberg detailed their unsuccessful efforts to obtain Somerset’s approval of
their construction proposals in 2019 and 2020 and asserted three claims. First,
they sought a declaratory judgment that Somerset lacked “authority to require
prior review and approval of the construction of structures on any units in the
Condominium,” that the 2012 Design Review Guidelines are void and
unenforceable, and that Canyon Home Builders and Greenberg “may proceed with
the construction of multiple-family structures” on their respective units. Canyon
Home Builders and Greenberg also asserted a breach of contract claim premised
on Somerset’s alleged breach of the duty of good faith and fair dealing in its
application of the 2012 guidelines to their construction proposals. Finally, they
alleged that Somerset’s board had tortiously interfered with their purchase
agreements with Cless/RC Somerset through, among other things, its “arbitrary,
capricious and unreasonable interpretation of the 2012 Design Review Guidelines
as applied to Canyon’s proposed development plans.” Canyon Home Builders and
Greenberg alleged that the reasons Somerset gave for its denials of their design

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proposals were “a pretext to conceal [Somerset]’s desire that [their units] never be
developed.”

¶8 Erie agreed to defend Somerset in the Federal Lawsuit under a
policy it had issued to Somerset with a policy period of July 23, 2020 to July 23,
2021 (the First Erie Policy). In February 2021, the federal court dismissed
Canyon Home Builders and Greenberg’s breach of contract and tortious
interference claims. In several subsequent decisions, the federal court declared
“that the 2012 Design Guidelines are inapplicable to multiple-family structures”
but denied Canyon Home Builders and Greenberg’s request for damages in
connection with that declaration. The court also denied their request for leave to
amend their complaint to add additional claims. A final judgment was entered on
July 5, 2022.

¶9 On July 13, 2022, counsel for RC Somerset wrote to Somerset to
confirm that it would again waive its right to purchase the units, as it had done
twice previously. On August 12, 2022, counsel for Somerset informed RC
Somerset that Somerset would be exercising its right of first refusal and option to
purchase the units. Several days later, Somerset’s counsel recorded an Affidavit
of Interest with respect to the units with the Walworth County Register of Deeds
“to provide notice of” Somerset’s impending purchase of the units. Somerset’s
counsel then informed the title company involved with the putative sales between
RC Somerset and Canyon Home Builders/Sheri Greenberg that Somerset had
exercised its option, recorded the affidavit, and was thus “of the opinion that RC
Somerset is legally unable to close on these sales.”

¶10 On August 19, 2022, Canyon Home Builders and Sheri Greenberg
assigned their respective rights, title, and interest in the units to Lakeside Living,

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LLC (Lakeside). RC Somerset and Lakeside proceeded to close the sales of the
units.

PROCEDURAL HISTORY

¶11 In November 2022, Somerset filed the present case against RC
Somerset, Cless, Canyon Development, Steve Greenberg, and Lakeside.
Somerset’s complaint recounted RC Somerset and Canyon Development’s 2019
agreements for the sale of the units, Somerset’s 2019 and 2020 waivers of its right
to purchase the units, its exercise of the purchase option in 2022, and RC
Somerset’s sale of the units to Lakeside. Somerset sought a declaratory judgment
that it had “properly exercised its first right and option to purchase” in 2022 and
that the sale to Lakeside was void, as well as an “[i]njunction to prevent the
modification or development of the [units].”

¶12 In January 2023, Canyon Development, Steve Greenberg, and
Lakeside answered Somerset’s complaint and asserted five counterclaims against
it. First, they sought a declaration that Somerset’s exercise of its right to purchase
in 2022 was void and that it could not “assert[] any claim or interest in [the
u]nits.” Second, they asserted counterclaims for intentional misrepresentation and
strict liability misrepresentation based on Somerset’s assertions that its design
review guidelines applied to Canyon Home Builders’s multi-family construction
plans. Next, they asserted a counterclaim for tortious interference based on
Somerset’s communicating to the title company that it did not believe RC
Somerset could close the sales to Canyon Home Builders/Greenberg, which
allegedly caused the title company to “refuse[] to be involved in the closing.”
Finally, they asserted a counterclaim for slander of title based on Somerset’s filing

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of the Affidavit of Interest with the Register of Deeds. RC Somerset filed a
separate answer that included the same five counterclaims.

¶13 In May 2023, Lakeside filed an amended set of counterclaims that
included only the counterclaims for declaratory judgment, slander of title, and
tortious interference. In addition, Canyon Home Builders was granted leave to
intervene as a party and filed a complaint against Somerset asserting the
counterclaims for intentional misrepresentation and strict responsibility
misrepresentation.1

¶14 Somerset tendered its defense of the counterclaims to Erie, which
agreed to provide a defense under a reservation of rights under its policy then in
effect, which covered the period from July 23, 2022 to July 23, 2023 (the Second
Erie Policy). Erie then intervened in the case and filed a motion for
declaratory/summary judgment seeking a declaration that there was no coverage
for any of the counterclaims against Somerset under the Second Erie Policy. As
relevant here, Erie conceded that the D&O Liability Form, which is a “claims-
made form,” provided an initial grant of coverage but argued that two exclusions
precluded coverage for the counterclaims. One of the exclusions, entitled “Prior
Notice,” bars coverage for

Any liability arising out of the facts alleged, or to the same
or related “wrongful acts” alleged or contained in any
“claim” which has been reported, or in any circumstances
of which notice has been given, under any policy of which
this Coverage Form is a renewal or replacement.

A “wrongful act” is defined in the form as

1
Somerset later amended its complaint, dropping Cless, Steve Greenberg, and Canyon
Development as defendants and adding Sheri Greenberg and Canyon Home Builders.

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No. 2024AP1098

any actual or alleged error, misstatement, misleading
statement, act or omission, or neglect or breach of duty by
any insured but only while acting within the scope of their
duties, related to the operations of the Condominium
Association or Homeowners Association, as an insured.

A “claim” includes “[a] civil … proceeding against an insured that seeks damages
because of a ‘wrongful act’ to which this insurance applies” and “[a] civil
proceeding against any insured commenced by the service of a complaint or
similar pleading upon such insured[.]”

¶15 The circuit court held a hearing on Erie’s motion in June 2024.
After hearing argument from the parties, the court granted Erie’s motion,
concluding that the Prior Notice exclusion in the Second Erie Policy barred
coverage for the counterclaims. The court reached this conclusion based on its
determination that the counterclaims were “clearly … related to wrongful acts that
had previously been reported” during the policy period of the First Erie Policy. In
an order entered after the hearing, the court stated that the Prior Notice exclusion
“operates to bar coverage for all claims and counterclaims alleged against
Somerset” and that “Erie … has no duty to defend or indemnify Somerset … for
any claims or counterclaims alleged against [it] in the [case].”2

DISCUSSION

I. Standard of Review

¶16 Erie agreed to provide a defense to Somerset in this case and relied
on documents and evidence outside the pleadings in support of its motion for

2
The circuit court declined to grant Erie’s motion with respect to another exclusion in
the D&O Liability Form entitled “Dishonest or Criminal Acts” because it concluded that facts
material to that exclusion were in dispute and required a jury to resolve.

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No. 2024AP1098

summary/declaratory judgment. In such circumstances, we analyze whether it is
entitled to summary judgment on the question of coverage based on the full
record, not just the counterclaims. See 5 Walworth, LLC v. Engerman
Contracting, Inc., 2023 WI 51, ¶13, 408 Wis. 2d 39, 992 N.W.2d 31. “Summary
judgment is appropriate when there is no genuine issue of material fact and ‘the
moving party is entitled to [a] judgment as a matter of law.’” Quick Charge Kiosk
LLC v. Kaul, 2020 WI 54, ¶9, 392 Wis. 2d 35, 944 N.W.2d 598 (quoting WIS.
STAT. § 802.08(2) (2023-24)3). We review the circuit court’s decision de novo.
5 Walworth, 408 Wis. 2d 39, ¶13. We also independently interpret the terms of
the Second Erie Policy. See id.

II. Insurance Policy Interpretation Standards

¶17 “When analyzing whether an insurance policy provides coverage, we
examine the terms of the policy and compare it to the facts in the record.” Id.,
¶16. Our goal in interpreting the Second Erie Policy is “to determine and give
effect to the intent of the contracting parties.” See American Fam. Mut. Ins. Co.
v. American Girl, Inc., 2004 WI 2, ¶23, 268 Wis. 2d 16, 673 N.W.2d 65. We
construe the language “as [it] would be understood by a reasonable person in the
position of the insured.” See id. “However, we do not interpret insurance policies
to provide coverage for risks that the insurer did not contemplate or underwrite
and for which it has not received a premium.” Id.

¶18 Insurance policy analysis ordinarily proceeds in three steps. Our
first step is usually to consider whether the insuring agreement in the D&O

3
All references to the Wisconsin Statutes are to the 2023-24 version.

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Liability Form provides an initial grant of coverage. See Acuity v. Chartis
Specialty Ins. Co., 2015 WI 28, ¶28, 361 Wis. 2d 396, 861 N.W.2d 533. Here
however, we need not do so because Erie acknowledges that the insuring
agreement initially covers the counterclaims. Thus, we proceed to the second step
and examine whether the Prior Notice exclusion precludes coverage. See id. If it
does, then we will consider “whether an exception to the exclusion applies to
reinstate coverage.” See id.

III. The Prior Notice Exclusion

¶19 As noted above, the Prior Notice exclusion forecloses coverage for
“[a]ny liability arising out of the facts alleged, or to the same or related ‘wrongful
acts’ alleged or contained in any ‘claim’ which has been reported … under any
policy of which this Coverage Form is a renewal or replacement.” The proper
application of this exclusion appears to present a question of first impression in
Wisconsin. The parties do not identify any published Wisconsin decisions
analyzing this or similar exclusions, and our research has not uncovered any.
Instead, the parties rely on non-Wisconsin cases in support of their arguments.

¶20 Before turning to those cases, we start with the language of the
exclusion itself, and two points that appear to be undisputed. First, there appears
to be no dispute that the D&O Liability Form in the Second Erie Policy “is a
renewal or replacement” of the First Erie Policy, which was in effect when the
Federal Lawsuit was commenced. Nor is there any dispute that the Federal
Lawsuit is a “claim” under the D&O Coverage Form that was reported to Erie
under the First Erie Policy.

¶21 Keeping our focus on the language of the exclusion, the crux of the
parties’ dispute concerns whether, in this case, Somerset’s potential “liability

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No. 2024AP1098

aris[es] out of … the same or related ‘wrongful acts’ alleged or contained in” the
Federal Lawsuit.4 In that action, Canyon Home Builders and Sheri Greenberg
asserted three claims against Somerset—breach of contract, tortious interference,
and a claim for declaratory judgment. The “wrongful acts” on which those claims
were based were Somerset’s refusals in 2019 and 2020 to approve Canyon Home
Builders’s plans for multi-family residential buildings because they did not
comply with Somerset’s 2012 Design Review Guidelines, refusals which
prevented Canyon Home Builders from finalizing its acquisition of the
condominium units from Cless/RC Somerset.5

¶22 Somerset argues that its potential liability for two of the
counterclaims asserted against it in the present case—tortious interference and
slander of title—does not arise out of related wrongful acts alleged in the Federal
Lawsuit. This is so, it contends, because those counterclaims are based on acts
that occurred in August 2022 after a final judgment was entered in the Federal

4
The parties recognize that Somerset’s potential liability in the present case does not
arise out of the “same” wrongful acts that were at issue in the Federal Lawsuit. Thus, the issue
here is whether Somerset’s potential liability arises from “related” wrongful acts that were at
issue in the Federal Lawsuit.
5
Somerset argues that its refusals to approve Canyon Home Builders’s plans were not
“wrongful acts” for the purpose of the Prior Notice exclusion because the court in the Federal
Lawsuit “determined th[at Somerset] had done nothing wrong” in sticking to its position that the
2012 Design Review Guidelines applied to Canyon Home Builders’s plans and precluded
multi-family residential buildings. For support, Somerset cites our per curiam decision in
Braketown USA, Inc. v. Markel Insurance Co., No. 2021AP1591, unpublished slip op. (WI App
Aug. 29, 2023). We reject Somerset’s argument for two reasons. First, a “wrongful act” under
the D&O Liability Form is “any actual or alleged error, … act or omission … by any insured …
while acting within the scope of their duties[.]” (Emphasis added.) Canyon Home Builders and
Sheri Greenberg’s allegation in the Federal Lawsuit that Somerset’s refusals were “arbitrary,
capricious and unreasonable” is sufficient to satisfy the policy definition of a “wrongful act.”
Second, Somerset’s reliance on Braketown is improper; parties may not cite per curiam decisions
as precedent or persuasive authority under our rules. See WIS. STAT. RULE 809.23(3).

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Lawsuit. Specifically, the tortious interference counterclaim is based on
Somerset’s attempt to exercise its right of first refusal and option to purchase the
units, and the slander of title counterclaim is based on Somerset’s recording of an
Affidavit of Interest with respect to the units with the Walworth County Register
of Deeds. In addition to the fact that these acts occurred after a final judgment
was entered in the Federal Lawsuit, Somerset emphasizes that the counterclaims
have been asserted by two parties—Lakeside and RC Somerset—that were not
parties in the Federal Lawsuit.

¶23 Erie disagrees, arguing that Somerset’s potential liability for the
tortious interference and slander of title counterclaims in the present case arises
out of related wrongful acts that were alleged in the Federal Lawsuit. Erie
contends that Somerset’s overarching goal since it first learned of Canyon Home
Builders’s interest in purchasing the units in 2019 has been to keep the units
“vacant and undeveloped.” It argues that Somerset’s potential liability for its
attempt to exercise its right of first refusal and recording of the Affidavit of
Interest in 2022 arises out of “related ‘wrongful acts’”—Somerset’s prior
withholding of approval of Canyon Home Builders’s multi-family design plans in
2019 and 2020—because they were undertaken in furtherance of that goal. As
Erie puts it, “[w]hile [Somerset]’s methods changed, the goal was the same: to
prevent anyone from developing the [units].” It also contends that the Prior Notice
exclusion can apply to claims arising out of related wrongful acts even if the
claims are brought by different parties.

¶24 Absent published on-point authority in Wisconsin, we turn to several
non-Wisconsin cases that have applied similar exclusions. In LaValley v. Virginia
Surety Co., 85 F. Supp. 2d 740 (N.D. Ohio 2000), LaValley, a lawyer, sought
insurance coverage after settling a malpractice lawsuit that arose out of his

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involvement in a company in which he was also a shareholder. Virginia Surety,
the insurer, declined coverage because of a prior notice exclusion in its policy,
which barred coverage for “any claim arising from any circumstance of which
notice has been given under any policy in effect” before Virginia Surety’s policy.
Id. at 742-43. (Although the LaValley case involved the second phrase of the
Prior Notice exclusion at issue here, the analysis provides useful guidance.)
Virginia Surety argued that this exclusion barred coverage because LaValley had
been sued years before its policy went into effect by another shareholder, who
alleged that LaValley had breached certain duties and misappropriated corporate
opportunities while acting as the company’s lawyer. Id.

¶25 The court agreed with Virginia Surety that the exclusion applied. Id.
at 746-47. It construed the exclusion to be satisfied if two requirements were met:
“1) a claim against the insured arises out of circumstances that predate the
exclusion of the insured’s current policy, and 2) those circumstances somehow
were brought to the attention of a former insurer in accordance with an earlier
policy.” Id. at 744. Both conditions were satisfied because the underlying lawsuit
arose out of circumstances that had occurred years before Virginia Surety’s policy
had gone into effect and about which LaValley had notified his prior insurer. Id.
at 747. Moreover, the two claims “arose from the same general circumstances,
namely, LaValley’s relationship with the [company’s] shareholders.” Id.

¶26 A similar prior notice exclusion was determined to bar coverage in
Zunenshine v. Executive Risk Indemnity, Inc., No. 97 Civ. 5525, 1998 WL
483475 (S.D.N.Y. Aug. 17, 1998), aff’d, 1999 WL 464988 (2d Cir. June 29,
1999). There, the exclusion barred coverage for losses in any way “resulting from
… any fact, circumstance, situation, transaction, event or Wrongful Act which,
before May 24, 1996, was the subject of any notice given under any” other similar

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No. 2024AP1098

insurance policy. Zunenshine, 1998 WL 483475, at *1. Zunenshine and other
directors and officers of SLM International, Inc. sought coverage from their
insurer, Executive Risk, after settling a lawsuit filed in May 1997 by a group of
investors who alleged that they “had negligently misrepresented SLM’s financial
condition” in a memorandum distributed in 1993, months before the investors
purchased unsecured notes from SLM. Id. at *2. Executive Risk argued that the
prior notice exclusion precluded coverage because some of the directors and
officers had been sued in 1994 by a group of former shareholders for making other
allegedly false and misleading public statements about the company’s financial
condition in 1993 and 1994. Id.

¶27 The district court agreed, concluding that although the lawsuits
concerned different allegedly false statements made in different forms, the
lawsuits shared “a strong factual nexus.” Id. at *5. On appeal, the Second Circuit
affirmed, explaining that the prior notice exclusion applied because similar
misstatements were at issue in both cases, and thus “the Shareholders’ lawsuit
should have put plaintiffs on notice of the potential for future claims by the
Noteholders.” Zunenshine, 1999 WL 464988, at *2.

¶28 In contrast to LaValley and Zunenshine, we conclude that the Prior
Notice exclusion does not bar coverage for Somerset’s potential liability for
tortious interference and slander of title in the present case. We reach this
conclusion even accepting as true Erie’s supposition that Somerset’s actions at
issue in the Federal Lawsuit and the present case were undertaken in furtherance
of a common goal. Under the plain terms of the exclusion, coverage is barred only
if the insured’s liability “arise[es] out of … related ‘wrongful acts’ alleged or
contained in” a previously reported claim. Here, that is not the case: Somerset’s
potential liability does not arise out of “related ‘wrongful acts’ alleged or

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No. 2024AP1098

contained in” the Federal Lawsuit. Somerset’s liability in the Federal Lawsuit
arose out of its refusals in 2019 and 2020 to approve Canyon’s plans for
multi-family residential buildings. Its potential liability for tortious interference
and slander of title in the present case does not arise out of those refusals. Instead,
its potential liability arises out of conduct that occurred years later—its attempt to
exercise its right of first refusal and filing of the Affidavit of Interest in 2022.

¶29 LaValley and Zunenshine involved situations in which the claims in
the separate lawsuits arose out of acts that occurred during a prior policy period.
That is not the case here: the acts which are the basis of the tortious interference
and slander of title counterclaims did not occur during the same prior policy
period as the acts out of which the claims in the Federal Lawsuit arose. While
Erie argues those acts are “related” by a common goal, the policy exclusion only
applies where the potential liability in the underlying claim arises out of those
prior wrongful acts.

¶30 In addition, we note that the present case features different parties
from the Federal Lawsuit. The counterclaims in the present case are brought by
two parties, Lakeside and RC Somerset, that were not parties in the Federal
Lawsuit. While Erie is correct that the Prior Notice exclusion does not require that
the lineup of parties in the two actions be identical, the presence of different
parties in a subsequent lawsuit is one factor that weighs against a determination of
relatedness. In addition, though both lawsuits pertain generally to the same
condominium units, “they involve different causes of action, legal duties allegedly
breached, types of damages, … alleged victims” and “different method[s] or
modus operandi.” See RLI Ins. Co. v. OutsideIn Architecture, LLC, 692 F. Supp.
3d 1077, 1102 (M.D. Fla. 2023).

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¶31 In its oral ruling, the circuit court relied on the Court of Appeals for
the Seventh Circuit’s decision in Hanover Insurance Co. v. R.W. Dunteman Co.,
51 F.4th 779 (7th Cir. 2022). We do not believe that that case compels a
no-coverage determination here. In Dunteman, the estate of the mother and
minority shareholder in several family-owned construction businesses filed a
lawsuit in 2017 against one of the businesses seeking a declaration that a prior
attempt to dilute her ownership interest was invalid. Id. at 783. Approximately
one year later, the estate filed an amended complaint that added another of the
businesses and the mother’s sons as defendants and alleged that the sons, in their
capacities as officers and directors of the businesses, were responsible for her
reduction in shares. Id. The amended complaint also detailed other events which
the court of appeals described “as a broader scheme by the [sons] to freeze out [the
mother] (and later her estate) as a minority shareholder in” the businesses. Id.
The sons and the businesses notified their insurer, Hanover, of the lawsuit for the
first time after the amended complaint was filed, but Hanover denied coverage
under its claims-made policy because the lawsuit had been filed (but not reported
to Hanover) during a prior policy period. Id. at 783-84. Hanover’s policy treated
“Related Wrongful Acts” and “Related Claims” as one wrongful act or claim and
deemed them to occur at the time of the earliest wrongful act or claim. Id. at 784.

¶32 The district court in Dunteman concluded that the insureds had not
timely notified it of the estate’s lawsuit during the 2017 policy period based on its
determination that the additional allegations and claims in the amended complaint
filed in 2018 were “Related Wrongful Acts” and “Related Claims.” Id. at 784-85.
On appeal, the Court of Appeals for the Seventh Circuit agreed, explaining that the
new allegations and claims in the amended complaint were related to the initial

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complaint “because they collectively concern[ed] the insureds’ wrongful reduction
of [the mother]’s ownership interest in the family business.” Id. at 786.

¶33 Dunteman is materially distinguishable from the present case
because the facts underlying the claims added in the amended complaint in that
case were grounded in events that occurred before the lawsuit was initially
commenced. The present case, in contrast, involves an initial lawsuit arising out
of events in 2019 and 2020 and a subsequent lawsuit containing claims giving rise
to potential liability arising out of acts that occurred several years later. This
difference is material to the outcome here because the Prior Notice exclusion only
applies to liability that arises out of the same or related acts that were previously
reported to Erie.

¶34 Finally, we note that our conclusion construes the prior notice
exclusion in the context of the D&O Liability Form as a whole and aligns with the
type of coverage the form affords. See Pantropic Power Prods., Inc. v.
Fireman’s Fund Ins. Co., 141 F. Supp. 2d 1366, 1371 (S.D. Fla. 2001) (“The
relatedness of the claims must be considered in the context of the type of insurance
at issue.”). The D&O Liability Form is a “claims made” form of coverage.
Claims made policies “are intended by insurers to avoid the hazard of an indefinite
future: Once the policy period has expired, the book can be closed on everything
except then-pending claims.” HR Acquisition I Corp. v. Twin City Fire Ins. Co.,
547 F.3d 1309, 1315 (11th Cir. 2008) (quoting Ameriwood Indus. Int’l Corp. v.
American Cas. Co., 840 F. Supp. 1143, 1148 (W.D. Mich. 1993)).

¶35 But as the HR Acquisition court recognized, “an insurer incurs a risk
with this kind of policy: liability for a claim that has been brewing and was ripe to
erupt before the policy period, but is asserted only after the policy period begins.”

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HR Acquisition, 547 F.3d at 1315 (quoting Ameriwood, 840 F. Supp. at 1149);
see also LaValley 85 F. Supp. 2d at 744 (“The problem with claims made policies,
from an insurer’s perspective, is that insureds might try to obtain coverage for
claims they know or are reasonably certain will be made against them in the near
future.”). “For this reason, claims made policies generally include a number of
endorsements and exclusions intended to limit this front end risk by cutting off
liability for claims ready, but not yet made, at the start of the policy period.” HR
Acquisition, 547 F.3d at 1315 (quoting Ameriwood, 840 F. Supp. at 1149). As
another court explained, “[t]he exclusions inherent in claims-made policies are
specifically designed to avoid claims which have accrued but not yet been filed.”
Vozzcom, Inc. v. Great Am. Ins. Co. of N.Y., 666 F. Supp. 2d 1332, 1339 (S.D.
Fla. 2009)), aff’d, 374 Fed. Appx. 906 (11th Cir. 2010) (per curiam).

¶36 The counterclaims for tortious interference and slander of title in the
present case were based on events that did not occur until after the policy period
for the Second Erie Policy began. The Second Erie Policy took effect on July 23,
2022, but Somerset’s conduct which is the gravamen of those counterclaims did
not occur until August 2022. We do not see how those counterclaims could have
been “brewing,” “ripe to erupt,” or “ready, but not yet made” before the Second
Erie Policy took effect. See HR Acquisition, 547 F.3d at 1315 (quoting
Ameriwood, 840 F. Supp. at 1149). Nothing in the record suggests that Somerset
knew, or was reasonably certain, that the counterclaims would be filed against it
before the Second Erie Policy’s policy period began. See LaValley, 85 F.
Supp. 2d at 744. And because the conduct underlying those counterclaims did not
occur until after the policy period began, the counterclaims did not accrue before
the Second Erie Policy went into effect. See Vozzcom, 666 F. Supp. 2d at 1339;
see also Hennekens v. Hoerl, 160 Wis. 2d 144, 152, 465 N.W.2d 812 (1991)

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No. 2024AP1098

(claim does not accrue until injured party knows or should know of injury, cause
of injury, and identity of responsible party).

CONCLUSION

¶37 For the foregoing reasons, we conclude that the Prior Notice
exclusion in the Second Erie Policy does not bar coverage with respect to the
tortious interference and slander of title counterclaims. Somerset’s potential
liability with respect to those counterclaims does not “aris[e] out of the facts
alleged, or … the same or related ‘wrongful acts’ alleged or contained in” the
Federal Lawsuit and thus does not fall within the scope of the exclusion. Because
Erie may have an obligation to indemnify Somerset if it is found liable with
respect to those counterclaims, it must continue to defend Somerset in this case.
See Steadfast Ins. Co. v. Greenwich Ins. Co., 2019 WI 6, ¶28, 385 Wis. 2d 213,
922 N.W.2d 71 (“[W]hen an insurance policy provides potential coverage for one
claim alleged in a lawsuit, the insurer must defend the entire suit[.]”).

By the Court.—Order reversed and cause remanded.

Recommended for publication in the official reports.

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