Liability insurance covers harm that the insured causes by “accident.” In recent years Wisconsin has equated an “accident” with a lack of “volition.” Specifically, an act that evidences “a degree of volition inconsistent with the term accident” does not trigger a covered “occurrence.” [1] This analysis is controversial because it potentially eliminates liability coverage for conduct that is “volitional” even if injury or harm from that conduct is not intended. Many if not most acts of negligence involve some degree of “volition,” and it is not hard to conjure up anomalous results flowing from an analysis that denies liability coverage due to the “volitional” nature of certain acts of negligence, such as when a wrecking crew inadvertently demolishes the wrong building. The Wisconsin Supreme Court’s new decision in Schinner v. Gundrum, 2013 WI 71, will do nothing to quell this controversy, as it applies the volitional acts analysis to exclude seemingly negligent conduct from coverage under occurrence-based liability policies. However, both the majority and dissent suggest this outcome was driven largely by the illegality of the insured’s conduct in providing alcohol to minors, as well as underlying public policy concerns over underage drinking, and the case may be distinguishable on that basis.

The insured, Gundrum, hosted an underage drinking party at his family’s business. One of the underage imbibers assaulted another partygoer, Schinner, leaving him paralyzed. Schinner sued Gundrum and Gundrum’s homeowner’s insurer for negligently creating the conditions that led to the assault. Like most liability policies, Gundrum’s homeowner’s policy provided coverage for an “occurrence,” which was defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The trial court granted summary judgment to the insurer on the issue of coverage, and the Court of Appeals reversed (for a discussion of the Court of Appeals’ decision, please see our 2013 Wisconsin Insurance Law Year in Review available here).

The Wisconsin Supreme Court addressed two main issues: (1) whether the volitional acts analysis applies from the perspective of the insured or the injured party; and (2) whether Schinner’s complaint alleged a covered occurrence. [2]

The Supreme Court was unanimous on the first issue: Courts should apply the volitional acts analysis from the standpoint of the insured. If the bodily injury or property damage is accidental from the standpoint of the insured, then there is a covered “occurrence” under standard liability policies.

The Court split 4-3 on the second issue, with the majority finding that Schinner’s injuries were not accidental from the perspective of the insured, Gundrum. The majority identified several intentional acts by Gundrum (e.g., hosting an underage drinking party, inviting someone with a known history of belligerent conduct while intoxicated, and failing to intervene as Schinner’s dispute escalated), and found that Schinner’s injuries were both a foreseeable result of and proximately caused by Gundrum’s intentional acts. The majority also noted the public policy supporting its decision: “Finding an occurrence and coverage under these circumstances would allow the host to escape responsibility for his intentional and illegal actions. We would be sending the wrong message about underage drinking parties, implying that whatever tragic consequences might occur, insurance companies will be there to foot the bill.” A vigorous dissent took the majority to task on this issue, accusing the majority of altering the legal analysis to suit a public policy outcome. The dissent identified a different “policy” that should be central to the outcome — the insurance policy. Specifically, the dissent argued that the majority improperly (1) treated the underage drinking party, and not the assault, as the “occurrence;” (2) inserted a new objective test and principles of negligence into the volitional acts analysis; and (3) “undermine[d] the well-established premise that intentional acts constitute an ‘occurrence’ if the injury is unexpected or unintended.”

While this case presents a unique set of facts that may allow policyholders to distinguish it going forward, it nevertheless expands, or at least perpetuates, Wisconsin’s “volitional acts” analysis, and insurers will likely rely on it in seeking to deny coverage for claims that policyholders expect to be covered under their policies.