Appeal from the United States District Court for the Western District of Wisconsin. No. 01-C-0546-S--John C. Shabaz, Judge.
Before Flaum, Chief Judge, and Bauer and Manion,
The opinion of the court was delivered by: Flaum, Chief Judge
ARGUED SEPTEMBER 10, 2002
The law firm of Brown & LaCounte, L.L.P. sought a declaration of coverage under its professional liability insurance policy with Westport Insurance Corporation for a claim arising out of a lawsuit filed by the Saginaw Chippewa Indian Tribe of Michigan. The district court held that because the insurance policy's "personal profit" exclusion barred Brown & LaCounte's claim for coverage, Westport Insurance Corp. had no duty to defend. For the reasons stated below, we affirm.
Brown & LaCounte, L.L.P. ("Brown"), a Wisconsin law firm, obtained a professional liability insurance policy from Kansas-based Westport Insurance Corp. ("Westport") in August 2000. Two months later the Saginaw Chippewa Indian Tribe of Michigan ("Tribe") filed a civil action against Brown alleging the firm improperly received and kept payments for legal services rendered under a void contract. *fn1 The Tribe's complaint sought a declaration that the contract was unenforceable, an accounting for and return of all monies paid to Brown for legal services performed, and payment of attorneys' fees and costs incurred by the Tribe in bringing the action. Brown promptly requested defense and indemnification against the Tribe's lawsuit from Westport under the terms of its policy, and Westport swiftly responded, denying coverage and refusing to defend Brown.
In August 2001, Brown filed suit against Westport in federal district court seeking a declaration of coverage and demanding reimbursement of defense costs. Westport then entered its counterclaim for a declaration of no coverage. On cross-motions for summary judgment the district court held that Brown was not entitled to defense or indemnification from Westport under the policy because the policy's personal profit exclusion barred Brown's claim. *fn2
On appeal Brown argues the district court erred in interpreting the policy's personal profit exclusion to bar its claim and urges this court to find that Westport has a duty to defend because Brown has committed a wrongful act and suffered a loss within the meaning of the policy.
We review the district court's grant of summary judgment de novo. Carney v. Village of Darien, 60 F.3d 1273, 1276 (7th Cir. 1995). A court's interpretation of the terms and coverage of an insurance policy is purely a question of law and therefore appropriately resolved on summary judgment. Kaun v. Indus. Fire & Cas. Ins. Co., 436 N.W.2d 321, 323 (Wis. 1989); United Nat'l Ins. Co. v. Dunbar & Sullivan Dredging Co., 953 F.2d 334, 337 (7th Cir. 1992) ("the construction of an insurance policy contract is a question of law"). In this diversity action the parties agree that Wisconsin law applies to interpret the meaning and scope of the policy's coverage.
In deciding whether Westport has a duty to defend, we must determine whether the allegations against Brown are covered by the policy. Smith v. Katz, 595 N.W.2d 345, 350 (Wis. 1999) (comparing the type of claims against the insured with the terms of the policy to determine the duty to defend). We find the Tribe's allegations against Brown comprise just the sort of claim barred by the policy's personal profit exclusion. Thus, we affirm the district court's decision that Westport has no duty to defend Brown in its lawsuit against the Tribe.
Brown claims the district court made two mistakes when it interpreted the personal profit exclusion to deny Brown coverage under the policy. First Brown argues the words "he or she" in the exclusion refer only to individual insured lawyers of the firm and not the firm itself, a genderless entity. Since the law firm of Brown & LaCounte, and not any individual lawyer, received and profited from the fees paid by the Tribe, Brown maintains that the exclusion does not apply to its claim. Second Brown argues the words "in fact" in the exclusion require Westport to affirmatively prove Brown gained an illegal profit before denying coverage. Brown claims Westport wrongly based its denial of coverage on the Tribe's allegations alone and therefore must defend Brown in the underlying litigation until the allegations are either proven or dismissed. For the reasons explained below, we reject both of these arguments.
First Brown argues the use of the words "he or she" in the personal profit exclusion must necessarily limit application of the exclusion to only individual insured per sons, and not an insured law firm. The district court regarded this construction of the exclusion as "unreasonable," and we agree. Under Wisconsin law insurance contract terms are given their plain meaning where possible, in consideration of the parties' intent. Wis. Label Corp. v. Northbrook Prop. & Cas. Ins. Co., 607 N.W.2d 276, 282 (Wis. 2000). As with other contracts, if an insurance policy's terms are ambiguous, the ambiguity is resolved against the drafter. Id. at 283. This does not mean we are in he habit of rewriting policies to provide coverage that the insurer did not contemplate. Rather, we interpret the terms as a reasonable person in the position of the insured would read them. Id.
Here, the exclusion applies to claims resulting from "any INSURED having gained in fact any personal profit or advantage to which he or she was not legally entitled." The term INSURED is defined in the Policy as the NAMED INSURED, and NAMED INSURED is further defined as "the person or entity listed in the Declarations." The entity listed in the declarations section of this policy is "Brown & LaCounte, L.L.P." Thus, the most natural and reasonable interpretation of the ...