Reversing the trial court’s grant of summary judgment to the insurer, the Wisconsin Supreme Court determined that genuine issues of material fact existed on whether ensuing losses as defined in the policy were covered. Cincinnati Ins. Co. v. Ropicky, 2026 Wisc. LEXIS 302 (Wis. July 7, 2026).
The insured suffered damage during a storm on May 11, 2018, when rainwater poured into the home. The insureds gave notice to their insurer, Cincinnati. Upon inspection, Cincinnati determined that water intrusion resulted from multiple construction defects in the home. In the front of the home, water entered through a gap in the stone veneer. The inspector also concluded that the damage from rainwater was not just from the May 11, 2018, storm, but damage had occurred from prior storm events.
Cincinnati informed the insureds that the gap was a construction defect, and coverage was denied for the repair of the gap based upon the policy’s Construction Defect Exclusion. There was an ensuing loss provision, however, that partially reinstated coverage for damage caused by the defective workmanship and materials. Cincinnati therefore agreed to pay $2,138.53 to repair the damaged walls and water stains. Cincinnati further agreed to pay $10,000 under the Fungi Additional Coverage for fungal damage. A total payment of $12,138.53 was made.
The insureds felt payment was insufficient. Cincinnati filed suit seeking a declaratory judgment that its policy provided no coverage beyond what it had paid. The insureds filed a counterclaim for breach of contract. The parties cross-moved for summary judgment. The trail court granted summary judgment to Cincinnati. The court of appeals reversed, finding there were genuine issues of material fact. The court of appeals held the rainwater was an ensuing loss. The damaged caused by the rainwater, therefore, was covered as an exception to the Construction Defect Exclusion.
On appeal, the Wisconsin Supreme Court considered the proper interpretation of (1) the Construction Defect Exclusion and Ensuing Loss Exception; and (2) the Fungi Exclusion and Fungi Additional Coverage.
Under the Construction Defect Exclusion, coverage could be denied for the damages initially caused by the excluded cause, but an ensuing loss exception secured coverage for the losses that followed from the excluded cause. The Ensuing Loss Exception operated to reinstate coverage to the extent the loss was established by the facts. While the cost of repairing the construction defect itself would not be covered, the ensuing loss caused by the rainwater that came as a consequence of the construction defect would be an ensuing loss.
The Fungi Exclusion did not apply when the policy owner bought the “Additional Coverage” as the insureds did here. The policy provided that the damages caused by fungi that would normally not be covered were covered up to $10,000 with the “Additional Coverage.” Here, the court first asked whether fungi caused the damages. If so, then the exclusion applied and such damages were presumptively not covered. But then the court asked if an exception to the exclusion applied. Here, the answer was yes because the insureds purchased additional coverage restoring coverage up to $10,000.
The record did not conclusively establish the existence of the disputed construction defects, nor did it determine the scope of damages such a defect could have caused. The circuit court erred in granting summary judgment because genuine disputes of material fact existed to preclude summary judgment on the issue of the Construction Defect Exclusion.
Further, there was a dispute over material facts regarding the existence of fungi and the extent to which fungi caused a loss.