The exclusion, and why it is a first in Wisconsin

The association carried successive Erie policies with a Directors & Officers Liability Form. The second policy incepted July 23, 2022. Its Prior Notice exclusion barred coverage for, in the court's quotation at ¶2, “[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 policy.

Erie's argument was that everything the association did served one continuous objective — stopping this development — which had already been noticed under the earlier policy. The court recorded at ¶19 that “[t]he 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.”

The answer, at ¶36, is timing-based:

“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.”

New conduct after a policy incepts is covered even where it pursues the same goal as previously noticed conduct. And because potential coverage for one claim triggers a defence to the whole suit — ¶37, citing Steadfast Ins. Co. v. Greenwich Ins. Co., 2019 WI 6, ¶28 — Erie must continue defending the association.

The footnote that closes a common escape route

The association argued it could not have committed a “wrongful act” because it had done nothing wrong. Footnote 5 disposes of that: a “wrongful act” under the form is “any actual or alleged error, … act or omission … by any insured … while acting within the scope of their duties,” and the builder's allegation that the refusals were arbitrary and capricious “is sufficient to satisfy the policy definition of a ‘wrongful act.’”

The same footnote carries a citation rule that constrains how much of Wisconsin's recent association case law can be used at all: “parties may not cite per curiam decisions as precedent or persuasive authority under our rules. See WIS. STAT. RULE 809.23(3).” Most Wisconsin condominium decisions of the last two years are per curiam, which is why published cases like this one carry disproportionate weight.

Where the real risk sat

The architectural refusals were not what generated the tort exposure. Recording an instrument against a pending sale was. An Affidavit of Interest placed in the land records, plus a statement to a title company that the seller could not close, is the conduct that produced a slander-of-title claim and a tortious-interference claim against a condominium association — and it happened after a federal court had already read the guidelines against the association.

The design-review side of this dispute is covered on our Wisconsin architectural review page. Worth noting alongside it: there is no Wisconsin appellate decision in this window addressing the merits of an architectural committee's reasonableness. The only appellate treatment of a Wisconsin design-review fight in three years is this insurance ruling.

What to watch next

Two things. A petition for review was filed, so the Wisconsin Supreme Court may yet take the prior-notice question — and because it is a question of first impression, there is no settled answer the court would be disturbing. Separately, the case returns to Walworth County with Erie defending, which means the merits of the slander-of-title and tortious-interference claims against the association are still to be decided.