Property Casualty Focus

In Riverback Farms LLC v. Saukville Feed Supplies Inc., a panel of the Wisconsin Court of Appeals found that an intentional act may still constitute an “occurrence” under a commercial general liability policy, reversed the circuit court’s summary judgment finding of no coverage in favor of the insurer, and remanded for further proceedings.

The underlying claim arose when a cattle feed supplier substituted an ingredient in its feed that ultimately led to a magnesium deficiency and physical injuries in a dairy farmer’s cattle as well as negative effects on the cows’ milk production. The feed supplier admitted that the ingredient substitution was intentional; however, the feed supplier claims that it did not “intend, foresee, or expect that the substitution would have an adverse impact on the cattle.” The dairy farmer filed suit against the feed supplier and the feed supplier’s insurer. The insurer moved to bifurcate the coverage dispute from the underlying case and sought a declaratory judgment that it had no duty to defend because there was no occurrence or property damage. The circuit court agreed there was no occurrence and dismissed the insurer from the case.

On appeal, the panel rejected the insurer’s argument, which was based on the assertion that the intentional nature of the ingredient substitution meant there was no accident, and thus no “occurrence,” under the policy. The panel relied on Wisconsin Supreme Court precedent to find that an intentional act may “set in motion a chain of events that includes an accident, a covered occurrence, causing property damage.” The panel further noted that the focus is not on whether the action that caused the property damage was intended, but whether the resultant property damage was foreseeable or expected. Because the panel found that a jury could find that the feed supplier did not expect or intend the damage to the cattle, the facts could constitute an accident, and therefore an “occurrence,” under the policy.

The panel also held that because the cattle suffered physical injuries on account of the magnesium deficiency caused by the substitution, the injuries constituted physical alterations, satisfying the physical alteration requirement of property damage under the policy. Notably, the panel declined to apply an impaired property exclusion to bar coverage, explaining that the exclusion applied only to situations in which a defective product was incorporated into the property of another, causing loss of use of said property due to the need to replace or remove the defective product, and that application was not supported by the record.