In Great Lakes Beverages, LLC v. Wochinski, the Wisconsin Court of Appeals held that the Breach of Contract Exclusion precluded coverage for an underlying tortious interference claim, such that AMCO Insurance Company (AMCO) did not owe any duty to defend or indemnify its insured, GLB Acquisition, LLC (GLBA).
Keith Wochinski, doing business as certain companies, manufactured and sold beverage products. In June 2009, K-Way Systems contracted with Wochinski to purchase his beverage business. The purchase contract was comprised of three parts: (1) an asset purchase agreement, under which K-Way purchased Wochinski’s customer lists and other business assets; (2) a covenant not to compete, under which Wochinski agreed not to compete with K-Way in the beverage distribution business for a certain period of time; and (3) a supply agreement, under which K-Way agreed to purchase beverage products from Wochinski to sell to its customers. Thereafter, Wochinski rescinded the purchase agreement for K-Way’s breach of the agreement in failing to pay Wochinski for certain products.
K-Way later sold its business to GLBA, which allegedly refused to honor Wochinski’s rescission of the purchase agreement. GLBA ultimately sold its assets and assigned its rights to Great Lakes Beverages LLC, the entity that filed the underlying suit, seeking to enforce the covenant not to compete in the purchase agreement. Wochinski then filed a third-party complaint against GLBA, which asserted a claim for tortious interference with contracts or prospective contract. That cause of action asserted that GLBA intentionally interfered with Wochinski’s contractual relationships by “telling actual and prospective customers that the non-compete was in effect when it was not,” an allegation that Wochinski argued implicated the disparagement offense in the definition of “personal and advertising injury.”
After AMCO intervened in the suit, the circuit court found that the Breach of Contract Exclusion applied to preclude coverage for the claims alleged against GLBA, including the tortious interference claim, because the claims arose from a contract relationship. Wochinski appealed that ruling.
The Wisconsin Court of Appeals affirmed the circuit court, rejecting Wochinski’s arguments that the Breach of Contract Exclusion was ambiguous and that the exclusion otherwise did not apply because the tortious interference claim was unrelated to K-Way’s breach of the purchase agreement. The court found that the truth or falsity of GLBA’s representations to customers that Wochinski was subject to a non-compete, depended on whether there was a valid rescission of the purchase agreement by Wochinski. While broadly construing the “arising out of” language in the exclusion, the court found that the alleged tortious interference committed by GLBA, grew out of, or flowed from, K-Way’s breach of the purchase agreement. Thus, the court held that the Breach of Contract Exclusion precluded coverage for the tortious interference claim and affirmed the circuit court’s ruling that AMCO owed no duty to defend or indemnify GLBA.
Tressler attorneys Shaun McParland Baldwin, Dennis Ventura and Todd Rowe represented AMCO in this matter.