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Fox City Scale Inc. v. Badger Scale Inc.6/17/1998
APPEAL from an order of the circuit court for Winnebago County: WILLIAM E. CRANE, Judge.
Affirmed.
Fox City Scale, Inc. and Gary Blasewitz, and Badger Scale, Inc. and Gregory A. Stratz co-appeal from an order granting declaratory judgment in favor of their insurers, Milwaukee Mutual Insurance Company and General Casualty Company of Wisconsin, which determined that the insurers did not owe a duty to defend or indemnify the insureds. We affirm.
The following facts are undisputed. Blasewitz and Stratz were equal shareholders in Fox City Scale, Inc. (Old Fox City). Due to disagreements between them, Blasewitz and Stratz entered into a Corporate Separation Agreement (the Agreement) in September 1995 and divided Old Fox City's assets, liabilities and customers between them. Blasewitz retained the Fox City name (hereafter New Fox City) and Stratz opened Badger Scale. Both entities sold, installed, serviced and repaired commercial and industrial scale and weighing devices. The Agreement provided, inter alia, that each company would receive a list of customers from Old Fox City and that each company was prohibited for a one-year period from soliciting, directly or indirectly, any business from the other's protected customer list.
Commercial disputes arose between the new entities. In February 1996, Blasewitz/New Fox City sued Stratz/Badger, alleging eight claims for monetary and/or declaratory relief. The amended complaint alleges that at or about the time of the separation, Stratz took actions which violated the Agreement and harmed the business reputations of Blasewitz/New Fox City by making defamatory statements about Blasewitz, intimidating employees to prevent Blasewitz/New Fox City from retaining and hiring employees, suggesting criminal activity by Blasewitz and Old Fox City, and making allegations about the financial activities of Old Fox City which negatively affected the financial situation of New Fox City. New Fox City's legal theories for relief were tortious interference with contractual relations and prospective contractual relations, deceptive and fraudulent representations under Section 100.18, Stats., business defamation and disparagement, civil conspiracy, unfair trade practices, breach of the Agreement, and declaratory relief of the parties' rights under the Agreement. In its amended answer and counterclaim, Badger denied the material allegations of the amended complaint and pled counterclaims of tortious interference with contractual relations, deceptive and fraudulent representations under Section 100.18, civil conspiracy, unfair trade practices, and breach of the Agreement.
The parties' insurers intervened in the action. Milwaukee Mutual insured Stratz/Badger and Old Fox City/Blasewitz. General Casualty insured New Fox City/Blasewitz and arguably owed coverage relating to Badger's counterclaims. The intervening insurers sought a declaratory judgment that they did not have a duty to defend or indemnify their insureds. The trial court agreed that their commercial general liability policies did not afford coverage to the insureds for the claims and counterclaims because this was "a battle between the two parties over the separation of the firms, not in the conducting of the business of either of them" as contemplated by the business owner's coverage each insured purchased. The insureds appeal.
The question of whether insurance coverage exists for the particular claims in a lawsuit is a question of law we review de novo. See Elliott v. Donahue, 169 Wis.2d 310, 316, 485 N.W.2d 403, 405 (1992). "An insurer has a duty to defend its insured if the complaint alleges facts that, if proven, would give rise to liability under the policy.
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