In the
United States Court of Appeals
For the Seventh Circuit
No. 06-3629
E RIC G. E BERTS and D EBORAH R. E BERTS,
Plaintiffs,
v.
T ORGE G ODERSTAD, S VETLANA
G ODERSTAD, also known as S UZANNE
G ODERSTAD, and N ATIONAL P LASTICS
T RADING C OMPANY, INCORPORATED ,
Defendants-Appellants,
v.
A MERICAN F AMILY M UTUAL
INSURANCE C OMPANY,
Defendant-Appellee.
Appeal from the United States District Court
for the Eastern District of Wisconsin.
No. 05 C 527—William C. Griesbach, Judge.
A RGUED A PRIL 7, 2008—D ECIDED JUNE 29, 2009
2 No. 06-3629
Before R IPPLE, W ILLIAMS, and S YKES, Circuit Judges.
S YKES, Circuit Judge. This case arises from the sale of
an expensive and historic home in Neenah, Wisconsin.
After moving in, the buyers discovered numerous
defects in the home and sued the sellers in federal
district court for breach of contract, various forms of
misrepresentation, and negligence. The present appeal is
limited to a dispute about insurance coverage—specifi-
cally, whether the sellers’ insurer has a duty to defend
the sellers under the terms of several insurance policies,
all of which provide defense-and-indemnity coverage
for “property damage” caused by an “occurrence,” which
is defined in the policies as an “accident.” The district
court, sitting in diversity and applying Wisconsin law,
held there was no duty to defend, entered summary
judgment for the insurer, and certified the no-coverage
judgment as final for purposes of an immediate appeal
under Rule 54(b) of the Federal Rules of Civil Procedure.
In their briefs and at oral argument, the sellers main-
tained that their insurer’s duty to defend was triggered
by the allegations in two of the claims in the underlying
lawsuit: a fraudulent misrepresentation claim under
section 100.18 of the Wisconsin Statutes and a common-
law negligent misrepresentation claim. The Wisconsin
Supreme Court’s intervening decision in Stuart v. Weisflog’s
Showroom Gallery, Inc. (“Stuart II”), 2008 WI 86, 311
Wis. 2d 492, 753 N.W.2d 448,1 has eliminated the first of
1
We refer to this decision as “Stuart II” because the court
resolved other issues in the case in an earlier opinion, see
(continued...)
No. 06-3629 3
these arguments, as the sellers have conceded. As to the
remaining argument, we conclude that the buyers’ claim
for negligent misrepresentation does not allege “property
damage” caused by an “accident.” Accordingly, the
insurer owes no duty to defend, and we affirm the judg-
ment of the district court.
I. Background
Torge and Svetlana Goderstad owned a vintage 19th
century home in Neenah, Wisconsin, and in 1996-1997
they enlarged it with a 4,000 square-foot addition. In 2003
they sold the home to Eric and Deborah Eberts for
$1.85 million. The Ebertses took occupancy in August 2003
and by November began to notice defects in the exterior
insulation and finishing work in the addition, which led
to water leaks and moisture entrapment between the
home’s interior and exterior walls. These and other
defects in the home prompted the Ebertses to sue the
Goderstads and their home-based business, National
Plastics Trading Co., Inc., in the United States District
Court for the Eastern District of Wisconsin; the Goderstads
had since moved to Colorado, and the suit invoked the
court’s diversity jurisdiction. The complaint alleged seven
claims for relief under Wisconsin law: (1) breach of con-
tract; (2) intentional misrepresentation; (3) a claim under
1
(...continued)
Stuart v. Weisflog’s Showroom Gallery, Inc., 2008 WI 22, 308
Wis. 2d 103, 746 N.W.2d 762, which the court referred to as
“Stuart I.” Stuart II, 2008 WI 86, ¶¶ 3-4.
4 No. 06-3629
Wis. Stat. § 895.80(1) 2 for violation of Wisconsin’s criminal
theft statute, Wis. Stat. § 943.20; (4) strict-responsibility
misrepresentation; (5) fraudulent misrepresentation in
violation of § 100.18, which prohibits false, deceptive, or
misleading representations in the sale of real estate;
(6) negligent misrepresentation; and (7) negligence.
American Family Mutual Insurance Co., the Goderstads’
insurer under several policies, appointed counsel for the
Goderstads under a reservation of rights, see Estate of
Sustache v. Am. Family Mut. Ins. Co., 2008 WI 87, ¶ 25, 311
Wis. 2d 548, ¶ 25, 751 N.W.2d 845, ¶ 25, and moved to
intervene under Rule 24(a) of the Federal Rules of Civil
Procedure in order to protect its interest in the lawsuit.
The district court allowed the intervention and on Ameri-
can Family’s motion, agreed to bifurcate the issues of
liability and coverage.
American Family then moved for summary judgment on
the coverage issue, which the district court granted.
Applying Wisconsin law, the court held that none of the
Ebertses’ claims were covered under any of the
Goderstads’ policies and therefore the insurer had no
continuing duty to defend. The district court then
certified its judgment under Rule 54(b) of the Federal
Rules of Civil Procedure to satisfy the final-judgment rule
and permit immediate review. 28 U.S.C. § 1291; F ED. R.
C IV. P. 54(b). In its current posture, therefore, this case
comes to us as the Goderstads versus American Family,
2
This statute has since been renumbered; it now appears at
Wis. Stat. § 895.446.
No. 06-3629 5
with the Goderstads as the appellants, opposing their
insurer’s early exit from the suit.
II. Discussion
A. The American Family Policies and Applicable
Insurance-Law Principles
The Goderstads and National Plastics were covered
under four American Family insurance policies during
the relevant time period—a homeowner’s policy, an
umbrella liability policy, and two business policies—the
relevant portions of which are not materially different.
Each policy provides coverage for “property damage”
caused by an “occurrence.” As is usually the case, “occur-
rence” is defined in the policies as an “accident,” but the
term “accident” is otherwise left undefined. Wisconsin
caselaw provides several alternative definitions, all of
which attempt to capture the fortuity principle central
to liability insurance. Lucterhand v. Granite Microsystems,
Inc., 564 F.3d 809, 812-13 (7th Cir. 2009). An “accident” for
purposes of liability insurance coverage is “[a]n unex-
pected, undesirable event or an unforeseen incident
which is characterized by a lack of intention.” Everson v.
Lorenz, 2005 WI 51, ¶ 15, 280 Wis. 2d 1, ¶ 15, 695 N.W.2d
298, ¶ 15 (internal quotation marks omitted). “ ‘The word
“accident,” in accident policies, means an event which
takes place without one’s foresight or expectation. A
result, though unexpected, is not an accident; the means
or cause must be accidental.’ ” Am. Family Mut. Ins. Co. v.
Am. Girl, Inc., 2004 WI 2, ¶ 37, 268 Wis. 2d 16, ¶ 37, 673
6 No. 06-3629
N.W.2d 65, ¶ 37 (quoting B LACK ’S L AW D ICTIONARY 15
(7th ed. 1999)).
American Family will owe a continuing duty to
defend the Goderstads if the allegations in the Ebertses’
complaint raise the possibility of coverage under the
foregoing policy language. Lucterhand, 564 F.3d at 811;
Wausau Tile, Inc. v. County Concrete Corp., 593 N.W.2d 445,
459 (Wis. 1999) (“[T]he duty to defend hinges on the
nature, not the merits, of the claim.”); see also Doyle v.
Engelke, 580 N.W.2d 245, 248 (Wis. 1998). On appeal,
the Goderstads have focused on just two of the seven
claims in the underlying suit; they contend that the
claim for fraudulent misrepresentation under § 100.18
and the claim for negligent misrepresentation fall poten-
tially within their policies’ coverages.3
3
The Goderstads did not and do not now contend that the
allegations in the Ebertses’ breach-of-contract claim describe
a covered “accident.” Nor do they claim that either of the
intentional misrepresentation claims (under the criminal theft
statute or the common law of fraud or deceit) qualifies as a
covered “accident.” They did argue before the district court
that the complaint’s allegations of negligence (as distinct from
negligent misrepresentation) triggered coverage. The district
court, citing Wausau Tile, 593 N.W.2d at 459, dismissed the
negligence claim for failure to state a claim; the claim
was premised on an allegation that the Goderstads had negli-
gently failed to inspect their house, and the court noted
that “there is no duty to inspect one’s home before selling it.”
The Goderstads have not pursued this issue on appeal.
No. 06-3629 7
B. Everson and the Court of Appeals’ Opinion in Stuart
The parties’ initial briefing and oral argument concen-
trated largely on the interplay between the Wisconsin
Supreme Court’s 2005 decision in Everson v. Lorenz, 2005
WI 51, 280 Wis. 2d 1, 695 N.W.2d 298, and the Wisconsin
Court of Appeals’ decision the following year in Stuart
v. Weisflog’s Showroom Gallery, Inc., 2006 WI App 184, 296
Wis. 2d 249, 722 N.W.2d 766. At issue in Everson was
whether a commercial general liability policy provided
coverage for claims of strict-responsibility and/or
negligent misrepresentation. 2005 WI 51, ¶ 11. The plain-
tiffs, Paul and Michelle Everson, purchased a residential
lot in a subdivision developed by the defendant, Richard
Lorenz, unaware that their lot was within the boundary
of a 100-year flood plain. Lorenz had provided the
Eversons with a list of the lots partially within the flood
plain, but the list erroneously designated lot 21 instead of
lot 31 as among those affected. That is, lot 31—the parcel
the Eversons purchased—was mistakenly designated as
lot 21 on the list, making it appear that lot 31 was not in
the flood plain. The Eversons sued Lorenz for strict-
responsibility and negligent misrepresentation.4
Like the policies at issue here, Lorenz’s insurance policy
covered only losses caused by an “occurrence,” defined as
“an accident.” The supreme court held that Lorenz’s
insurer was not obligated to defend the misrepresentation
4
The Eversons’ other claims—for breach of contract and
intentional misrepresentation—were not before the court for
purposes of its coverage inquiry. Everson, 2005 WI 51, ¶ 13 n.5.
8 No. 06-3629
claims. Using the definition of “accident” we have set
forth above, the court concluded that Lorenz’s misrepre-
sentation about the lot “cannot be considered an ‘accident’
for purposes of . . . liability insurance coverage.” Id. ¶ 18.
The court noted that “[t]o be liable, Lorenz must have
asserted a false statement, and such an assertion
requires a degree of volition inconsistent with the term
accident. Although this assertion may be prompted by
negligence, it is nevertheless devoid of any suggestion of
accident.” Id. ¶ 19 (citation omitted). Thus, the court
viewed the “degree of volition” inherent in the making
of a false factual statement as incompatible with the
common understanding of the term “accident.” Accord-
ingly, the court concluded that Lorenz’s insurance
policy did not cover the strict-responsibility and negligent
misrepresentation claims asserted in the underlying
complaint. Id. ¶¶ 19-20. This was so even though
Lorenz did not intend to deceive the Eversons when he
made the false statement but was merely alleged to have
been negligent as to—or strictly responsible for—the
statement’s falsity. Id. ¶ 22.
Everson scotches insurance coverage for most misrepre-
sentation claims where the policy in question limits
coverage to losses caused by “occurrences,” meaning
“accidents”—as many liability policies do. Almost all
cognizable claims of misrepresentation require a false
statement of fact and therefore a degree of volition incon-
No. 06-3629 9
sistent with an “accident” under the rationale of Everson.5
Indeed, the Goderstads agreed in the district court that
based on Everson, the Ebertses’ various misrepresenta-
tion claims against them were not covered. The district
court accepted that concession and summarily disposed
of the Goderstads’ remaining argument—that the negli-
gence claim was sufficient to trigger coverage—by dismiss-
ing that count for failure to state a claim. See supra note 3.
The district court’s decision, however, was issued
before the Wisconsin Court of Appeals decided Stuart v.
Weisflog’s Showroom Gallery, Inc., 2006 WI App 184, 296
Wis. 2d 249, 722 N.W.2d 766. Stuart involved the
question of liability coverage for a loss incurred in con-
nection with a claim for violation of a deceptive-practices
regulation. The regulation in question, Wisconsin Adminis-
trative Code ATCP § 110.02(11), prohibits the making of
any “false, deceptive or misleading representation in
order to induce any person to enter into a home improve-
ment contract.” The case involved a building contractor
who was retained on a home remodeling project and was
later sued by the homeowner for serious defects in the
remodeling work. The court of appeals heard the case in
two stages: one concerning issues on the merits, Stuart v.
5
An arguable exception might be a misrepresentation
involving a failure to disclose a fact where the law imposes
a duty to disclose. As we will discuss in a moment, however,
misrepresentation by nondisclosure cannot be committed
unintentionally; negligent misrepresentation by nondisclosure
is not a recognized tort in Wisconsin.
10 No. 06-3629
Weisflog’s Showroom Gallery, Inc., 2006 WI App 109, 293 Wis.
2d 668, 721 N.W.2d 127, and the other concerning
insurance-coverage issues, Stuart v. Weisflog’s Showroom
Gallery, Inc., 2006 WI App 184, 296 Wis. 2d 249, 722
N.W.2d 766.
In the second stage, the court of appeals held that the
contractor’s insurer was obligated to indemnify the
contractor under its commercial general liability policy,
which—again, like the policies here—provided coverage
for loss caused by an “occurrence,” defined as an “acci-
dent.” The court of appeals reasoned that because
a misrepresentation in violation of ATCP § 110.02(11)
did not require intent to defraud, the contractor’s mis-
representation could be considered an “accident” for
purposes of the insurer’s indemnity obligation. Id. ¶ 33.
The court also noted that § 100.18—the consumer-protec-
tion statute on which the Ebertses have premised one
of their misrepresentation claims in this case—should
be read in pari materia with the court’s interpretation of
ATCP § 110.02(11). Id. ¶ 28.
On the strength of the court of appeals’ decision in Stuart,
the Goderstads asked the district court to reconsider its no-
coverage decision. The court declined to do so, and
this appeal ensued. In the meantime, however, the Wis-
consin Supreme Court granted review in Stuart, and like
the court of appeals, heard the case in two stages. See
Stuart v. Weisflog’s Showroom Gallery, Inc. (Stuart I), 2008 WI
22, 308 Wis. 2d 103, 746 N.W.2d 762 (involving merits
issues); Stuart v. Weisflog’s Showroom Gallery, Inc. (Stuart II),
2008 WI 86, 311 Wis. 2d 492, 308 Wis. 2d 103, 753 N.W.2d
No. 06-3629 11
448 (involving coverage issues). But when the Goderstads
argued their case in this court, Stuart II was still pending
and awaiting decision in the supreme court. The
Goderstads suggested that we certify this case to the
supreme court pursuant to Circuit Rule 52, but we opted
to hold it in abeyance and required the parties to file
supplemental briefs after the supreme court released its
decision in Stuart II. They have done so.
C. The Wisconsin Supreme Court’s Decision in Stuart II
1. Stuart II and the § 100.18 Misrepresentation Claim
As we have noted, the Goderstads initially maintained,
based on the court of appeals’ decision in Stuart, that
the Ebertses’ misrepresentation claim under § 100.18
triggers American Family’s duty to defend. They argued
that the statute—like ATCP § 110.02, at issue in Stuart—
lacks an intent-to-deceive element and therefore the
alleged statutory misrepresentation should be considered
a covered “accident.” But the supreme court in Stuart II
reversed the court of appeals, rejecting the argument that
either ATCP § 110.02 or § 100.18 lack a scienter require-
ment; both the regulation and the statute require proof
of a defendant’s purpose or intent to induce a contract or
sale. Stuart II, 2008 WI 86, ¶ 34 n.15. More specifically,
ATCP § 110.02(11) prohibits the making of any “false,
deceptive or misleading representation in order to
induce any person to enter into a home improvement
contract”; § 100.18 prohibits “any assertion, representa-
tion or statement of fact which is untrue, deceptive or
misleading” made “with intent to sell” or “intent to
12 No. 06-3629
induce” a contract for the sale of (among other things)
real estate.
It is true, as we have recently observed, that the Stuart II
court was sharply divided on the underlying rationale
for its decision; the case was decided by a three-justice
plurality opinion and two concurrences, each of which
attracted two votes. See Lucterhand, 564 F.3d at 814-15
(discussing the 3-2-2 split in Stuart II). But the court was
unanimous in concluding that the misrepresentation
claim was not covered; all of the justices agreed that a
claim for misrepresentation under ATCP § 110.02
required a degree of “volition” that was inconsistent with
the idea of an “accident.” Stuart II, 2008 WI 86, ¶¶ 28-35.
The “intent to sell” and “intent to induce [a contract]”
language of § 100.18 is, if anything, even clearer on this
point than the “in order to induce [a contract]” language
in ATCP § 110.02. The supreme court’s decision in Stuart II
is fatal to the Goderstads’ argument that the § 100.18
misrepresentation claim falls potentially within the cover-
age of their policies. They recognize as much, conceding
the issue in the statement they filed with this court
after Stuart II was released.
2. Stuart II and the Negligent Misrepresentation Claim
The Goderstads’ remaining argument—that the Ebertses’
negligent misrepresentation claim triggers coverage—
would also fall short based on Everson alone, for the
reasons we have already explained. But the split opinions
in Stuart II have complicated the matter. To recap, Everson
No. 06-3629 13
held that strict-responsibility and negligent misrepresenta-
tion claims were not covered under policy language
defining “occurrence” as an “accident” because the
insured was alleged to have asserted a false statement
and “such an assertion requires a degree of volition
inconsistent with the term accident.” Everson, 2005 WI 51,
¶ 19. The justices’ disagreement in Stuart II centered
primarily on the proper way to read Everson. See
Lucterhand, 564 F.3d at 814-15.
The Everson decision appeared to establish a bright-line
rule that the very act of making a false statement or
assertion of fact—necessary to most claims for misrepre-
sentation—was inherently repugnant to the idea of a
covered “accident.” As we have noted, the logic of this
decision precludes coverage for almost all claims of
misrepresentation, or at least all those that involve an
affirmative false statement or assertion as opposed to a
failure to disclose. Everson, 2005 WI 51, ¶¶ 19-20. The
logic of the decision probably precludes coverage for
any misrepresentation based on nondisclosure as well;
in the limited circumstances where the law imposes a
duty to disclose, the failure to do so is treated as the
equivalent of an affirmative false representation.6 Kaloti
Enters., Inc. v. Kellogg Sales Co., 2005 WI 111, ¶ 13, 283
Wis. 2d 555, ¶ 13, 699 N.W.2d 205, ¶ 13.
But in Stuart II, the court appears to have taken a posi-
tion that is less categorical than Everson, or at least less
6
But as we will discuss shortly, Wisconsin has not recognized
a claim for strict-responsibility or negligent misrepresentation
based on nondisclosure.
14 No. 06-3629
clear. We described the competing positions of the
justices at greater length in Lucterhand, 564 F.3d at 814-15,
and need not repeat that discussion here. It suffices to
say that only Justice Roggensack, joined in concurrence
by Justice Ziegler, adhered to a “bright-line” interpretation
of Everson. Stuart II, 2008 WI 86, ¶¶ 92-104 (Roggensack, J.,
concurring). Justice Bradley, joined in concurrence by
Chief Justice Abrahamson, rejected that view; this was
unsurprising, since they had dissented in Everson. Id.
¶¶ 72-80 (Bradley, J., concurring); Everson, 2005 WI 51,
¶¶ 434-61 (Bradley, J., dissenting). The three justices in
the plurality sidestepped the debate between the concur-
rences, focusing instead on the purposive “inducement”
element of the ATCP § 110.02 claim. The plurality con-
cluded that the contractor’s false representations about
his qualifications and design were both “volitional” and
(as required for a violation of ATCP § 110.02) made “in
order to induce” the making of a home-improvement
contract, and that this combination rendered the loss
“nonaccidental.” Stuart II, 2008 WI 86, ¶ 40. Justice Bradley
and Chief Justice Abrahamson joined this part of the
plurality opinion, with certain provisos that are not
important to the analysis here. Id. ¶¶ 70-80 (Bradley, J.,
concurring); see also Lucterhand, 564 F.3d at 814-15 (explain-
ing the disagreement between the Stuart II plurality
opinion and Justice Bradley’s concurrence).
Significantly, Stuart II involved a claim for misrepresen-
tation in violation of ATCP § 110.02, not a claim for negli-
No. 06-3629 15
gent misrepresentation.7 Although the justices disagreed
about how to interpret Everson, there is nothing in the
Stuart II opinions to suggest that the holding of Everson is
no longer good law. Everson held that a false assertion of
fact giving rise to a strict-responsibility or negligent
misrepresentation claim is not an “accident” for pur-
poses of liability coverage, and that holding is fully
applicable here.
In their supplemental brief, the Goderstads do not
contest this conclusion but maintain instead that because
the Ebertses’ complaint alleges nondisclosures, the negligent
misrepresentation claim “by definition” involves “an
inadvertent, non-volitional failure to act” rather than a
“volitional” false statement of fact. They argue that a
negligent failure to disclose material facts qualifies as a
“nonvolitional” act under Stuart II and is therefore
an “accident” for purposes of coverage under their insur-
ance policies.
The problem with this argument is that negligent misrep-
resentation by nondisclosure has not been recognized as
a tort in Wisconsin. See Kaloti, 2005 WI 111, ¶ 13 n.3
(“We have never held that a claim for strict responsibility
for misrepresentation or negligent misrepresentation can
7
The plurality said in a footnote that it was not resolving “the
question of whether an ‘occurrence’ in a future case could
involve an accidental misrepresentation, in which a person
may have misspoken.” Stuart II, 2008 WI 86, ¶ 44 n.17. This is
a bit imprecise; mere “misspeaking” is not actionable in tort.
Negligent misrepresentation requires more. See R ESTATEMENT
(S ECOND ) OF T ORTS § 552 (1977).
16 No. 06-3629
arise from failure to disclose.”).8 The foundational and oft-
cited case of Ollerman v. O’Rourke Co. specifically declined
to adopt a negligent misrepresentation-by-nondisclosure
claim, 288 N.W.2d 95, 112 (Wis. 1980); Ollerman’s endorse-
ment of a limited species of liability for nondisclosure
pertained to the tort of intentional misrepresentation, id.
at 99-107. Negligent misrepresentation by nondisclosure
is a claim of questionable heritage and has been soundly
rejected in some jurisdictions.9 See, e.g., Martin v. Ohio State
8
In this regard, Wisconsin’s pattern jury instructions conflict
with the caselaw. See W ISCONSIN JURY I NSTRUCTIONS —C IVIL 2402,
2403 (2009) (stating, contrary to Kaloti, that “silence if there is
a duty to speak” may constitute a representation of fact for
purposes of strict-responsibility and negligent misrepresenta-
tion).
9
Misrepresentation-by-nondisclosure cases (Ollerman included,
see 288 N.W.2d at 99-107) often rely on § 551 of the Restatement
(Second) of Torts. That section, titled “Liability for Nondis-
closure,” is somewhat confusingly phrased. Subsection
(1), setting forth the general liability principle, states that “[o]ne
who fails to disclose to another a fact that he knows may
justifiably induce the other to act or refrain from acting in a
business transaction” is liable if he has a duty to disclose.
R ESTATEMENT (S ECOND ) OF T ORTS § 551(1) (1977) (emphasis
added). Liability is thus stated in terms of the actor’s intent; the
actor must fail to disclose a fact that he knows may justifiably
induce the other to act. The liability principle is qualified,
however; the circumstances must give rise to a duty to
disclose before liability can attach. Nondisclosure of a fact the
actor knows will induce another to act can give rise to liability
“if, but only if, [the actor] is under a duty to the other to
(continued...)
No. 06-3629 17
Univ. Found., 742 N.E.2d 1198, 1209 (Ohio Ct. App. 2000)
(“A negligent misrepresentation claim does not lie for
omissions: there must be an affirmative false statement.”);
Binette v. Dyer Library Ass’n, 688 A.2d 898, 903 (Me. 1996);
Richey v. Patrick, 904 P.2d 798, 802 (Wyo. 1995); Matthews v.
Kincaid, 746 P.2d 470, 471 (Alaska 1987). We recognize, of
9
(...continued)
exercise reasonable care to disclose the matter in question.” Id.
This is the language of negligence, and it is a bit hard to recon-
cile with the intent requirement specified in the general
liability principle. Section 551 thus appears to require both that
the tortfeasor act knowingly (in the sense that he knows of
the other party’s specific reliance and yet does not disclose)
and that he violate the standard of reasonable care.
We doubt that a limiting principle on an intent-based tort
was meant to expand liability to include mere negligence as a
general matter; the tort of negligent misrepresentation is
separately addressed in § 552 of the Restatement, and the
scope of liability for negligent misrepresentation described
there is quite circumscribed. Subsection (2) of § 551 lists the
limited circumstances under which a duty to disclose may
arise, and comment m clarifies that whether there is a duty to
disclose “is always a matter for the determination of the court.”
In short, any expansion of liability for misrepresentation
based on nondisclosure is a difficult and important common-
law policy issue. See Tietsworth v. Harley-Davidson, Inc., 2004
WI 32, ¶ 15, 270 Wis. 2d 146, ¶ 15, 677 N.W.2d 233, ¶ 15 (noting
that whether to extend the duty to disclose “is a significant
common-law policy issue.”). We will not speculate here about
whether the Wisconsin Supreme Court is likely to recognize
a claim of negligent misrepresentation based on nondisclosure.
18 No. 06-3629
course, that an insurer’s duty to defend is determined on
the basis of “arguable, as opposed to actual, coverage.”
Estate of Sustache, 2008 WI 87, ¶ 20. “It is the nature of the
alleged claim that is controlling, even though the suit
may be groundless, false, or fraudulent.” Id. Perhaps this
rule is (or should be) different for claims that lack any
basis in the law; if the only claim even arguably sup-
porting coverage must be dismissed as legally insufficient,
dismissal of that claim may be appropriate during the
coverage phase of the litigation. That is how the district
court handled the negligence claim here, and we see
nothing improper in this approach. See supra note 3.
Regardless, the Goderstads still cannot prevail. Even
assuming for the sake of argument that a negligent misrep-
resentation by nondisclosure claim were cognizable in
Wisconsin and that such a claim involved acts that are
sufficiently “nonvolitional” under Stuart II to count as an
“accident,” the American Family policies limit coverage
to “property damage,” and the misrepresentations
alleged here did not cause property damage. It is well
established in Wisconsin that misrepresentations gen-
erally do not cause property damage; they cause
pecuniary or economic loss. Everson, 2005 WI 51, ¶ 39;
Smith v. Katz, 595 N.W.2d 345, 352-54 (Wis. 1999); see also
W ISCONSIN JURY INSTRUCTIONS—C IVIL 2400 (Law Note
discussing the “benefit of the bargain” and “out of pocket”
measures for damages in intentional, strict-responsibility,
and negligent misrepresentation cases).
Stuart II was perhaps an anomalous exception. There, the
contractor’s misrepresentations about his qualifications
No. 06-3629 19
and design were coupled with negligence in the perfor-
mance of the remodeling contract; the jury heard evidence
and awarded damages based on numerous items of
damage to the home. Stuart II, 2008 WI 86, ¶¶ 52-54.
Damages were assessed in a lump sum, and the jury
was asked to apportion the damages between the ATCP
§ 110.02 misrepresentation and negligence claims. The
supreme court in Stuart I, however, threw out the appor-
tionment, so there was no distinction in the
measure of damages as between the two claims. 2008 WI
22, ¶¶ 25-31.
This case is different. Although the complaint describes
many defects in the home the Goderstads sold to the
Ebertses, the Goderstads’ alleged misrepresentations did
not cause those defects. The injury caused by the mis-
representations was purely pecuniary or economic;
because of the misrepresentations, the home was worth
less than the Ebertses paid for it. For this additional
reason, there is no coverage. American Family has no
duty to defend the Goderstads.
D. Additional Policies?
We need only briefly address one final issue, and that
is whether the district court should have considered
certain additional insurance policies the Goderstads
acquired after selling their home and moving to Colorado.
The district court declined to consider the issue because
the Goderstads made only fleeting reference to these
policies—indeed, presented no evidence pertaining to
them—at the time the court took up American Family’s
20 No. 06-3629
motion for summary judgment. As we have said many
times before, a motion for summary judgment requires
the responding party to come forward with the evidence
that it has—it is “ ‘the “put up or shut up” moment in a
lawsuit.’ ” Koszola v. Bd. of Educ. of the City of Chicago,
385 F.3d 1104, 1111 (7th Cir. 2004) (quoting Schacht v. Wis.
Dep’t of Corr., 175 F.3d 497, 504 (7th Cir. 1999), rev’d on
other grounds, Higgins v. Mississippi, 217 F.3d 951 (7th Cir.
2000)). The district court’s decision was manifestly correct.
For the foregoing reasons, we A FFIRM the judgment of
the district court and D ENY the Goderstads’ motion to
certify a question to the Wisconsin Supreme Court
under Circuit Rule 52.
6-29-09