Frankenthal International, LTD v. West Bend Mutual Insurance Company

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
November 26, 2024
A party may file with the Supreme Court a
Samuel A. Christensen petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10 and
RULE 809.62.

Appeal No. 2023AP1841 Cir. Ct. No. 2021CV1373

STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT III

FRANKENTHAL INTERNATIONAL, LTD AND
FRANKENTHAL BUILDING, LLC,

PLAINTIFFS-RESPONDENTS,

V.

WEST BEND MUTUAL INSURANCE COMPANY,

DEFENDANT-APPELLANT.

APPEAL from a judgment of the circuit court for Brown County:
JOHN P. ZAKOWSKI, Judge. Affirmed.

Before Stark, P.J., Hruz and Gill, JJ.

¶1 HRUZ, J. West Bend Mutual Insurance Company appeals a
stipulated judgment, which followed a grant of partial summary judgment in favor
of Frankenthal International, LTD, and Frankenthal Building, LLC (collectively,
“Frankenthal”), and a denial of summary judgment to West Bend. The circuit court
No. 2023AP1841

concluded that West Bend’s property insurance policy covered water damage to a
building that Frankenthal owned. In reaching this conclusion, the court determined
that the building was not “vacant,” as that term is defined in West Bend’s policy,
because it was being used for Frankenthal’s “customary operations” at the time of
the water damage. West Bend argues that the court erroneously interpreted the
vacancy provision by determining that Frankenthal’s “customary operations”
included Frankenthal’s ongoing, active efforts to lease space in its building.

¶2 We conclude that the term “customary operations,” as used in the
vacancy provision in West Bend’s policy, is susceptible to more than one reasonable
interpretation and is therefore ambiguous. For this reason, we construe the policy
in favor of coverage for Frankenthal and conclude that, based on the undisputed
facts in this case, Frankenthal’s “customary operations” under West Bend’s policy
included Frankenthal’s ongoing, active efforts to lease space in its building.
Accordingly, we affirm.

BACKGROUND

¶3 The relevant facts are undisputed. Frankenthal owns real property
located at 124 North Adams Street (“the 124 Adams Property”), 130 North Adams
Street (“the 130 Adams Property”), and 306-308 Cherry Street (“the Cherry
Property”) in downtown Green Bay, Wisconsin. These three properties are all
contained within a single building—the Frankenthal Building—which Frankenthal
owns. Frankenthal insured these three properties through an insurance policy issued
by West Bend (“the Policy”), which was in effect from June 1, 2020, through June 1,
2021.

¶4 The three properties at issue are listed as two locations in the Policy’s
declarations page. Location one consists of the 124 Adams Property, which the

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Policy describes as “Office” and “Offices-Non-Governmental.” Location two
consists of the 130 Adams Property and the Cherry Property. The Policy describes
that location as “Office” and “Mercantile–Multiple Occupancy–over 15,000 sq. ft.”
The 124 Adams Property and the Cherry Property were last occupied by tenants in
2009 and 2013, respectively.

¶5 The 130 Adams Property was last rented by Wells Fargo Bank, N.A.,
from January 2, 2015, until May 30 or 31, 2020. Although its lease ended in
May 2020, Wells Fargo had moved out of the 130 Adams Property in
February 2020. When Wells Fargo moved out of the property, it left various pieces
of its furniture behind, including office desks and chairs, conference room tables
and chairs, lobby chairs, cubicle partitions, and file cabinets.

¶6 Frankenthal retained Wells Fargo’s furniture to keep the 130 Adams
Property furnished for potential new tenants. On March 4, 2020, Frankenthal
showed that property to a potential new tenant, who gave a “strong indication of
interest but needed to take the information back to [its] Board Members for
approval.”1 Frankenthal also employed a property manager, Steve Van Handel, who
visited the Frankenthal Building once or twice a week to check for maintenance
issues.

¶7 On February 19, 2021, Frankenthal received a call from a pedestrian
who was walking by the Frankenthal Building. The individual informed
Frankenthal that “he heard what sounded like a waterfall and then saw water coming
from the [building’s] masonry.” At some point between February 18 and 19, 2021,
some of the building’s pipes froze and burst, causing water damage to the three

1
Ultimately, this potential new tenant did not rent the 130 Adams Property, given that the
property remained ready for occupancy when the loss occurred.

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No. 2023AP1841

properties. The pipes froze and burst because of a furnace malfunction, which
resulted in the building losing heat. The reason for the furnace malfunction is
unknown, but the parties have not asserted that it is material to this appeal.

¶8 Van Handel believed he had last visited the Frankenthal Building on
either February 16 or 17, 2021, to inspect the building for any potential issues. At
that time, he did not see anything that required maintenance and he did not notice
any water leakage. When the water damage occurred, the 130 Adams Property still
contained Wells Fargo’s furniture. No furniture was located in the 124 Adams
Property and the Cherry Property.

¶9 On the same day that Frankenthal discovered the water damage, it
filed a claim with West Bend. On February 22, 2021, Bradley Kohl, West Bend’s
adjuster for this claim, inspected the damaged properties. West Bend later denied
Frankenthal’s claim.

¶10 Frankenthal eventually sued West Bend, alleging that West Bend had
breached the Policy by denying Frankenthal’s claim and that West Bend breached
its statutory obligation to pay the “amounts due to its insureds in a proper and timely
fashion” pursuant to WIS. STAT. § 628.46(1) (2021-22).2 West Bend raised the
Policy’s vacancy provision—the one at issue in this appeal—as one of its
affirmative defenses. That provision—located in the section of the Policy titled
“Building and Personal Property Coverage Form” under Paragraph E—is titled
“Loss Conditions.” The provision reads, in relevant part:

When this policy is issued to the owner or general lessee of
a building, building means the entire building. Such

2
All references to the Wisconsin Statutes are to the 2021-22 version unless otherwise
noted.

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No. 2023AP1841

building is vacant unless at least 31% of its total square
footage is:

(i) Rented to a lessee or sublessee and used by the lessee
or sublessee to conduct its customary operations;
and/or

(ii) Used by the building owner to conduct customary
operations.

(Formatting altered.) Further, a building “under construction or renovation [is] not
considered vacant.”

¶11 The provision then states that “[i]f the building where loss or damage
occurs has been vacant for more than 60 consecutive days before that loss or damage
occurs,” then West Bend “will not pay for any loss or damage caused by any of the
following, even if they are Covered Causes of Loss.” The list that follows includes
water damage as an excluded cause.

¶12 West Bend moved for summary judgment, arguing that the water
damage was not covered by the Policy because the Frankenthal Building had been
vacant for more than sixty consecutive days before the loss occurred. Frankenthal
opposed West Bend’s motion and moved for partial summary judgment on the issue
of coverage. Among other things, Frankenthal argued that: (1) the Frankenthal
Building was not vacant under the Policy; (2) West Bend had waived or was
estopped from invoking the Policy’s vacancy provision as a defense because it had
paid a vandalism claim in June 2020, despite knowing that the building had no
tenants;3 and (3) concurrent causes created the loss, and the Policy covered the loss
under the concurrent cause doctrine.

3
Vandalism is also an excluded cause in the Policy’s vacancy provision.

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No. 2023AP1841

¶13 The circuit court held a hearing on the summary judgment motions,
which was followed by supplemental briefing from the parties. The court then
issued a written decision, granting Frankenthal’s partial summary judgment motion
and denying West Bend’s motion. Relying on Myers v. Merrimack Mutual Fire
Insurance Co., 788 F.2d 468 (7th Cir. 1986), a case that both parties referenced in
their summary judgment briefing, the court concluded that the Frankenthal Building
was not vacant under the Policy.4

¶14 In Myers, the property owner bought a fully occupied apartment
building in central Illinois in 1977. Id. at 469. By 1981, the building had no tenants
and the owner began renovating it. Id. The renovation, however, proceeded slowly
because the owner’s job required him to always be on call and because the owner
was building his own home in Missouri. Id. at 469-70. As a result, the owner was
present at the building and worked on its renovation only about once a month. Id.
at 470. During the renovation period, the building was “deserted and unsecured,”
had no water or electricity, and its units were empty, except for some stoves and
refrigerators. Id. Furthermore, there were several doors in the building that did not
have locks. Id. Approximately two years into the renovation, a fire damaged the
building. Id. at 469. After noting the differences between the terms “vacant” and
“unoccupied,” the United States Court of Appeals for the Seventh Circuit ultimately
concluded that the building was vacant, and not merely unoccupied, because the
building’s units “were entirely empty for approximately eighteen months, lacking
both tenants and inanimate objects.” Id. at 471-72.

4
The circuit court also concluded that West Bend had not waived its right to invoke the
Policy’s vacancy provision as a defense to Frankenthal’s claim nor was it estopped from doing so.
The court did not address Frankenthal’s concurrent cause argument.

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No. 2023AP1841

¶15 The circuit court, here, extensively compared the circumstances in
Myers to the undisputed facts in this case. It found that several factors that were
absent in Myers were present in this case, which militated in favor of finding that
the Frankenthal Building was merely unoccupied, but not vacant, at the time of the
water damage. In particular, the court noted: Frankenthal was in the business of
owning and leasing property; a tenant had occupied the 130 Adams Property until
February 2020; and that property had remained tenantless after February 2020
because “demand for professional office space plummeted due to
government-mandated shutdowns and corporate decisions to allow (or require)
employees to work from home, both in response to the pandemic.” For these
reasons, the court believed that the Frankenthal Building’s tenantless status was
qualitatively different from that of the building in Myers.

¶16 Furthermore, the circuit court noted Frankenthal’s actions taken to
keep the Frankenthal Building in an immediately leasable position, which
distinguished its efforts from those of the insured in Myers, “who did not appear to
be looking for tenants to fill any available space or to fill the building once the
renovation was completed.” These actions included keeping Wells Fargo’s
furniture, which Frankenthal did precisely “to entice prospective tenants.” Other
factors that the court considered important in this regard were: Van Handel’s
consistent maintenance inspections of the Frankenthal Building and his presence in
the building one or two days prior to the loss; the maintenance of building security
because of concerns with “on-going rioting, vandalism, metal thefts, and squatting”;
the property still having operating utilities; and the fact that the Frankenthal
Building was not an “orphaned property on the edge of town where, if there was no
property manager, it would take days and days for anyone to notice a situation.”
The court thus found that Frankenthal’s efforts to actively seek prospective tenants

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No. 2023AP1841

were consistent with its customary operations of leasing space in the Frankenthal
Building, despite the delay in those efforts being successful.

¶17 Taken together, the circuit court found that the foregoing
circumstances, which were not present in Myers, showed that Frankenthal was using
the Frankenthal Building to conduct the customary operations “of a true landlord.”
Because “at least 31% of [the Frankenthal Building’s] total square footage
[was] … [u]sed by the building owner to conduct customary operations,” the court
concluded that it was not “vacant” at the time of loss. Accordingly, the court granted
partial summary judgment to Frankenthal on the issue of coverage and denied
West Bend’s motion for summary judgment.

¶18 With only the issue of damages remaining, Frankenthal and
West Bend stipulated to a final order and judgment in favor of Frankenthal and
against West Bend for $512,200, plus postjudgment interest, and costs in the amount
of $840.50. Thereafter, the circuit court entered its final order and judgment for the
stipulated amount. West Bend now appeals.

DISCUSSION

¶19 We review summary judgment decisions de novo, applying the same
methodology as the circuit court. Maxwell v. Hartford Union High Sch. Dist.,
2012 WI 58, ¶26, 341 Wis. 2d 238, 814 N.W.2d 484. Summary judgment is
appropriate “if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled to a judgment as a
matter of law.” WIS. STAT. § 802.08(2). Here, the circuit court’s summary
judgment decision turned on the interpretation of the Policy and, more specifically,
on the term “customary operations” in the Policy’s vacancy provision. The

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No. 2023AP1841

interpretation of an insurance policy is a question of law that we review de novo.
American Fam. Mut. Ins. Co. v. American Girl, Inc., 2004 WI 2, ¶23, 268 Wis. 2d
16, 673 N.W.2d 65.

¶20 We use a three-step procedure for interpreting insurance policies.
Id., ¶24. We first “examine the facts of the insured’s claim to determine whether
the policy’s insuring agreement makes an initial grant of coverage.” Id. If the
policy clearly did not intend to cover the insured’s asserted claim, we end the
analysis there. Id. If the policy provides an initial grant of coverage, we next
examine the policy’s exclusions to determine whether any of them preclude
coverage of the insured’s claim. Id. “Exclusions are narrowly or strictly construed
against the insurer if their effect is uncertain.”5 Id. If an exclusion applies, we then
determine “whether any exception to that exclusion reinstates coverage.” Id.

¶21 The vacancy provision at issue here states, in relevant part, that when
the Policy is issued to an owner or a general lessee of a building—here,
Frankenthal—that building is vacant “unless at least 31% of its total square footage

5
In the circuit court, West Bend conceded that the Policy made an initial grant of coverage
and argued the vacancy provision as an exclusion to coverage. Neither West Bend nor Frankenthal
addressed this concession in their appellate briefs, but we asked about it at oral argument—which
we held on September 5, 2024, in Green Bay, Wisconsin—for purposes of interpreting the Policy.
West Bend maintained that the vacancy provision is an exclusion to coverage. Frankenthal agreed
that there was an initial grant of coverage but that the vacancy provision was a condition of that
coverage. The parties also referenced Waterstone Bank, SSB v. American Family Mutual
Insurance Co., 2013 WI App 60, 348 Wis. 2d 213, 832 N.W.2d 152, in answering whether the
vacancy provision is an exclusion, versus a condition of coverage within the initial coverage grant.
We note, however, that the parties largely did so for purposes of their respective waiver/estoppel
and concurrent cause arguments, which we do not address.

Ultimately, we need not decide which type of provision the vacancy provision is. While
its status as an exclusion to coverage would require us to construe it narrowly or strictly, we would
find the provision ambiguous—and therefore construe it in favor of Frankenthal—even when
interpreting it as part of the initial grant of coverage. See Folkman v. Quamme, 2003 WI 116, ¶13,
264 Wis. 2d 617, 665 N.W.2d 857 (“If there is an ambiguous clause in an insurance policy, we will
construe that clause in favor of the insured.”).

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No. 2023AP1841

is:” “(i) [r]ented to a lessee or sublessee and used by the lessee or sublessee to
conduct its customary operations; and/or (ii) [u]sed by the building owner to
conduct customary operations.” The Policy does not define “customary
operations,” and no Wisconsin appellate court appears to have previously
interpreted the term in this context. Thus, we apply the rules of construction used
in contract interpretation to interpret the term “customary operations” in the Policy.
See Secura Supreme Ins. Co. v. Estate of Huck, 2023 WI 21, ¶12, 406 Wis. 2d 297,
986 N.W.2d 810.

¶22 When interpreting insurance policies, we seek to determine and give
effect to the contracting parties’ intent. American Girl, 268 Wis. 2d 16, ¶23. We
construe a policy according to its plain and ordinary meaning as it would be
understood by a reasonable insured, Preisler v. General Cas. Ins. Co., 2014 WI
135, ¶18, 360 Wis. 2d 129, 857 N.W.2d 136, but we do not interpret policies “to
provide coverage for risks that the insurer did not contemplate or underwrite and for
which it has not received a premium,” American Girl, 268 Wis. 2d 16, ¶23. If
possible, we should interpret policy language “so that all parts are given meaning.”
Secura, 406 Wis. 2d 297, ¶12 (citation omitted).

¶23 “Policy language is ambiguous when a reasonable insured would read
the policy to provide coverage and the language is susceptible to more than one
reasonable interpretation.” Preisler, 360 Wis. 2d 129, ¶20. Policy language “may
be inherently ambiguous or may be ambiguous when considered in the context of
the insurance policy as a whole.” Frost ex rel. Anderson v. Whitbeck, 2002 WI
129, ¶18, 257 Wis. 2d 80, 654 N.W.2d 225. If such language is ambiguous, the
ambiguities are construed against the insurer and in favor of coverage. Id., ¶19.

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No. 2023AP1841

¶24 Both West Bend and Frankenthal agree that Frankenthal is in the
business of leasing space in the Frankenthal Building. Also, at oral argument, both
parties agreed that, based on the record in this case, there is no dispute that
Frankenthal was attempting to lease space in the Frankenthal Building. West Bend
argues, however, that those efforts to lease space in the building are not part of
Frankenthal’s customary operations, while Frankenthal contends that they are.

¶25 At the outset, we reach certain conclusions that underlie our analysis
going forward. First, while we agree with and appreciate the general distinction that
Frankenthal advances between properties that are “unoccupied” versus those that
are “vacant,” our focus must be on the actual language in the Policy’s relevant
vacancy provision. That is to say, did Frankenthal use at least 31% of the
Frankenthal Building for its “customary operations”?6

¶26 Second, we categorically reject certain notions that West Bend
advances for why a building owner’s active attempts to find tenants are not part of
its “customary operations.” It is myopic to contend that such active, ongoing
conduct is not a customary operation merely because the owner yields a monetary
return from “its business” only by actually renting units. Likewise, for purposes of
understanding the meaning of a building owner’s customary operations, we are
unmoved by either the Policy’s inclusion of a sixty-day “grace period” once vacancy
is established per its terms or by the potential for a property owner to otherwise

6
The “31% of the total square footage” requirement of the vacancy provision is not at
issue here. At oral argument, Frankenthal’s position was that the Frankenthal Building either
satisfied the 31% requirement or West Bend failed to raise, in its denial of coverage, the issue of
whether the total percentage was met. West Bend agreed that it had not raised the “total percentage”
issue in the circuit court and that its position—both in the circuit court and now on appeal—was
that Frankenthal used no percentage of the Frankenthal Building for its customary operations.
Accordingly, the only issue is whether the property was vacant, not whether it was sufficiently
vacant.

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No. 2023AP1841

insure against losses after that grace period. Again, the question is whether the
Frankenthal Building was vacant under the Policy’s terms at the time of the water
damage.

¶27 Returning then to our interpretation of the term “customary
operations” in the Policy’s vacancy provision, and its application to Frankenthal’s
claim related to the water damage at issue, we outline the parties’ remaining
arguments.

¶28 At oral argument, we pressed West Bend on why it believed
Frankenthal’s efforts to lease space in the Frankenthal Building were not part of its
customary operations even though Frankenthal intended to lease that space and
evidence showed that it was actively attempting to do so. West Bend responded
that Frankenthal was not “using” the Frankenthal Building—i.e., Frankenthal was
not doing anything at or with the building—to obtain a lessee. It asserted that
conducting showings of the building and having the property manager visit the
building once or twice a week were insufficient actions to constitute a use of the
building for Frankenthal’s customary operations. Indeed, West Bend argued that
had there been a leasing office in the Frankenthal Building and had Frankenthal used
that office to service its properties in the building, then Frankenthal would have been
using the building for its customary operations because those actions go beyond
simply attempting to lease space in the building and involve a more active use of
the building. Beyond the foregoing, West Bend also claimed that Frankenthal was
not using the space in the building for the purposes provided in the Policy’s
declarations page (“office” or “mercantile”).

¶29 Conversely, Frankenthal argued that its ongoing efforts to lease space
in the Frankenthal Building were part of its customary operations because it

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No. 2023AP1841

continuously used the building by keeping it furnished, negotiating with prospective
tenants to lease space in the building, having its property manager regularly visit the
building for maintenance, and maintaining functional utilities and security. As to
West Bend’s interpretation of customary operations as requiring the actual renting
of space in the building and activities incidental to that renting, Frankenthal
contended that the Policy fails to explicitly state this requirement. In addition,
Frankenthal noted that the “office” and “mercantile” terms used in the declarations
page, which West Bend contends are “purposes” for which the building is used, do
not describe Frankenthal’s own customary operations, but instead merely describe
the type of building uses that the Policy insures.

¶30 We also asked West Bend and Frankenthal how a reasonable insured
would interpret the Policy’s vacancy provision and its purpose. As to the
provision’s purpose, West Bend argued that a reasonable insured would understand
the purpose of the vacancy provision as requiring a “systematic and pervasive”
presence that serves as a deterrent to risks such as theft, vandalism, or water damage.
Based on this purpose, West Bend contended that a reasonable insured would
understand that an entirely empty building without tenants and without a regular
presence (or with only a maintenance visit once or twice a week) is a vacant building
under the Policy. Further, a reasonable insured would not understand that
maintaining a building in a manner where it can be promptly leased is a customary
operation because the building is still “not being used.” Again, West Bend asserted
that Frankenthal would have been using the Frankenthal Building to conduct its
customary operations if there had been a leasing office with people in it every day
to undertake activities needed to lease the building.

¶31 Frankenthal’s overall understanding of the purpose of the Policy’s
vacancy provision is similar to that of West Bend’s. Frankenthal asserted that a

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No. 2023AP1841

reasonable insured would understand the vacancy provision’s purpose as requiring
an owner’s regular presence at the building to ensure that the building’s condition
has not deteriorated. Thus, Frankenthal contended that a reasonable insured would
understand that the Policy required an owner to “engage in a genuine process” of
attempting to lease space in the building, and, if the owner did so, the building would
not be vacant. This process includes keeping utilities in operation, maintaining the
building, having a property manager visit the building two or three times per week,
advertising the space for rent, and negotiating leases with prospective tenants. For
both parties, then, an owner’s regular presence at the functional building matters in
determining how a reasonable insured would interpret the Policy’s vacancy
provision.

¶32 In addition to their arguments above, both parties contend that their
opponent’s interpretation of the term “customary operations” would render certain
language in the Policy’s vacancy provision meaningless—a result that we must
avoid, if possible, when construing contracts, including insurance policies. Secura,
406 Wis. 2d 297, ¶17; see also Connors v. Zurich Am. Ins. Co., 2015 WI App 89,
¶28, 365 Wis. 2d 528, 872 N.W.2d 109 (“[C]ourts avoid interpreting policy
language as though it adds nothing, as if it were ‘mere surplusage.’” (citation
omitted)).

¶33 West Bend argues that customary operations must include only
“actually renting the property and activities incidental to renting the property.”
Citing Oakdale Mall Associates v. Cincinnati Insurance Co., 702 F.3d 1119 (8th

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No. 2023AP1841

Cir. 2013),7 West Bend contends that the circuit court’s interpretation of the term—
namely, that efforts to lease space in the building alone are customary operations—
would render the Policy’s vacancy provision meaningless “because the
landlord-insured could take minimal steps to find renters” and thereby avoid having
an actually vacant property ever be deemed vacant.

¶34 Frankenthal, for its part, asserts that West Bend’s interpretation would
essentially have the Policy twice apply the lessee clause of the vacancy provision
(i.e., that the building be “[r]ented to a lessee or sublessee and used by the lessee or
sublessee to conduct its customary operations”) and render meaningless the owner
clause of the provision (i.e., that the building be “[u]sed by the building owner to
conduct customary operations”). In other words, West Bend’s requirement that a
building owner’s customary operations include only the actual leasing of space is
the same as requiring that the building be rented and used by a lessee or a sublessee
to conduct its own customary operations. Frankenthal thus contends that
West Bend’s interpretation would render the owner clause of the vacancy provision
meaningless.

¶35 In Oakdale Mall, the United States Court of Appeals for the Eighth
Circuit conducted an analysis that can be understood to support both West Bend’s
and Frankenthal’s respective positions. In that case, the owner of a mall filed a
claim with its insurer to replace items stolen from the mall. Oakdale Mall, 702 F.3d
at 1120-21. Similar to the Policy here, the policy in that case deemed the mall vacant

7
West Bend concedes that it did not cite Oakdale Mall Associates v. Cincinnati
Insurance Co., 702 F.3d 1119 (8th Cir. 2013), in support of its arguments in the circuit court. Yet,
we agree with West Bend that the case addresses issues consistent with those raised by the parties
both in the circuit court and now on appeal. See State v. Markwardt, 2007 WI App 242, ¶33, 306
Wis. 2d 420, 742 N.W.2d 546 (allowing citations to additional authority on appeal when the circuit
court has some idea of a party’s position).

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No. 2023AP1841

unless at least 31% of its total square footage was either: (1) “[r]ented to a lessee
or sub-lessee and used by them to conduct their customary operations”; or
(2) “[u]sed by the building owner to conduct customary operations.” Id. at 1121.
The parties agreed that the mall had at least four tenants, but the parties disagreed
about two other tenants who had not used their space in the mall to conduct their
operations for more than a year before the loss. Id. As to one of those two tenants,
the owner argued that it was using that tenant’s space as part of its customary
operations because that tenant still had a valid lease and a right to occupy the space,
despite the fact that the tenant had stopped doing business at the mall. Id. at 1124.

¶36 The Eighth Circuit noted that the owner’s interpretation of the
vacancy provision created a conflict between the two clauses of the vacancy
provision. Id. at 1125. By having a valid lease satisfy the clause requiring that the
owner use the building to conduct customary operations, the Eighth Circuit
concluded that the clause requiring that the tenant rent and use the space to conduct
its customary operations would have no effect. Id. The Eighth Circuit’s conclusion
supports Frankenthal’s position that West Bend’s interpretation of “customary
operations” would render the owner clause of the vacancy provision meaningless.

¶37 But the Eighth Circuit also rejected the owner’s argument that the mall
was not vacant because the owner used the mall to conduct customary operations
simply by placing a sign outside of the mall that advertised space for rent and by
seeking out new tenants. Id. at 1124. The Eighth Circuit determined that the
owner’s interpretation would mean that “the mall could be completely vacant, but
the mall would be deemed fully occupied for purposes of the vacancy provision if
the owner simply posted a sign outside or placed an advertisement online or in the
newspaper.” Id. The Eighth Circuit further determined that the owner’s
interpretation would render the vacancy provision meaningless because the

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No. 2023AP1841

provision’s primary purpose was “to reduce the risk of loss by requiring a physical
presence at the property to help secure the property from vandals and thieves.” Id.
The Eighth Circuit’s conclusion in this regard supports West Bend’s position that
Frankenthal’s interpretation of “customary operations” would render the Policy’s
vacancy provision meaningless.8

¶38 Given the foregoing considerations, including especially the Policy’s
language and the agreed-upon purpose of the vacancy provision, we conclude that
the term “customary operations” in the Policy is susceptible to more than one
reasonable interpretation. Therefore, the term “customary operations” in the Policy,
at least as applied to the undisputed facts of this case, is ambiguous. Consequently,
we construe that term against West Bend and in favor of coverage for Frankenthal.
Because we are to decide cases on the narrowest grounds—here, the existence of
ambiguous contract language—we need not definitively decide which interpretation
is best, either generally or under the facts of this case. See Patrick Fur Farm, Inc.
v. United Vaccines, Inc., 2005 WI App 190, ¶8 n.1, 286 Wis. 2d 774, 703 N.W.2d
707.

8
While the parties cite to other non-Wisconsin authorities, none of them are particularly
apt, especially when comparing certain facts among the cases. If anything, the disparate focuses
and analyses of the question of “vacancy” for purposes of property insurance coverage in those
cases tend to support both parties’ interpretations of the term “customary operations.” See Icarus
Holdings 2, LLC v. AmGUARD Ins. Co., 601 F. Supp. 3d 314, 324 (N.D. Ill. 2022) (concluding
that customary operations “included work in support of renting the building like maintenance or
cleaning, but not holding the property without tenants and listing it for sale”); Gallo v. Travelers
Prop. Cas., 801 N.Y.S.2d 849, 851 (App. Div. 2005) (concluding that a building was not vacant
“inasmuch as plaintiff had sufficient ‘business personal property,’ i.e., furnishings, in the three
apartments ‘to conduct his customary operations’ of renting the apartments”); cf. Peace ex rel.
Lerner v. Northwestern Nat’l Ins. Co., 228 Wis. 2d 106, 136, 596 N.W.2d 429 (1999) (stating that
an insurance policy clause does not become ambiguous because the parties “can point to conflicting
interpretations of the clause by different courts. If the existence of differing court interpretations
inevitably meant ambiguity, then only the first interpretation by a court would count”).

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No. 2023AP1841

¶39 When read together with the insured properties’ descriptions in the
Policy’s declarations page, a reasonable insured in Frankenthal’s position could read
its “customary operations” to include the actual leasing of space in the Frankenthal
Building and activities incidental to leasing that space, which, as West Bend
suggests, include having a leasing office in the building that regularly services its
leased properties. The Policy’s declarations page uses the terms “Office,”
“Non-Governmental,” and “Mercantile” under the label “Building and Occupancy
Description,” which a reasonable insured could read to describe the properties’ uses.
Although those terms may just describe the type of property that is insured, they
may also be read to describe the purposes for which those spaces are leased or
otherwise used. Because Frankenthal was not using any of the space in the
Frankenthal Building for the “purposes” listed in the Policy’s declarations page, and
it was not engaged in any of the activities incidental to leasing those spaces for those
“purposes,” Frankenthal was not, in that sense, “using” the Frankenthal Building to
conduct its customary operations. Therefore, a reasonable insured in Frankenthal’s
position could understand that its building would not be covered for the water
damage under the Policy due to it being “vacant.”

¶40 But West Bend’s interpretation of “customary operations” as
including only the actual leasing of space in the Frankenthal Building, while not
per se unreasonable, would largely subsume the vacancy provision’s owner clause
into the lessee clause. West Bend’s interpretation renders the owner clause without
much, if any, effect, given that it requires the same thing as the lessee clause of the
vacancy provision (that space be rented to a lessee or sublessee and used to conduct
that lessee or sublessee’s customary operations). That is, under West Bend’s
interpretation, both clauses would require actual leasing of space to a tenant.

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¶41 If, however, a reasonable insured in Frankenthal’s position read
customary operations to include active efforts to lease space in the Frankenthal
Building and to keep the property in a position to promptly lease its space, that
interpretation gives meaning to the owner clause of the Policy’s vacancy provision.
A building owner, such as Frankenthal, which is in the business of leasing space in
its building cannot obtain tenants to lease space without actively seeking those
tenants. In actively seeking those tenants, a building owner must maintain its
building in an immediately leasable form by: keeping utilities in place, having a
property manager visit the building one or two times per week, keeping the building
furnished, advertising the space for rent, and negotiating with prospective tenants to
lease space in the building. Without maintaining a building in rentable form, an
owner would be unable to obtain tenants to lease space in its building and, therefore,
be unable to engage in its business of leasing space.

¶42 The actions by Frankenthal involved more than simply placing a sign
on its building that advertised space for rent or placing an advertisement online or
in the newspaper, which the Eighth Circuit in Oakdale Mall considered, as a matter
of law, insufficient actions to constitute a use of a property owner’s building for its
customary operations. Furthermore, and importantly, performing such actions
fulfills the vacancy provision’s purpose of requiring the owner’s presence to ensure
the building neither deteriorates nor is otherwise damaged. Thus, unlike the owner’s
interpretation of customary operations in Oakdale Mall—which the Eighth Circuit
found unreasonable because it rendered meaningless both the vacancy provision and
its purpose—here, including an owner’s active efforts to lease space as part of its
customary operations presents a reasonable interpretation of the term, given that it
fulfills the vacancy provision’s purpose and gives effect to the provision’s owner
clause.

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No. 2023AP1841

¶43 Because we interpret policy language “so that all parts are given
meaning,” Secura, 406 Wis. 2d 297, ¶12 (citation omitted), including a building
owner’s ongoing, active efforts to lease space as part of the owner’s customary
operations gives meaning to the owner clause of the Policy’s vacancy provision. At
a minimum, this interpretation of what constitutes an owner’s “customary
operations” in this commercial leasing context is a reasonable one for an insured to
reach.

¶44 Myers, the case on which the circuit court relied and that we described
above, presents circumstances in which an owner would not reasonably believe its
actions constituted part of its customary operations. Although Myers did not
interpret the term “customary operations,” its facts present an example of an owner
who is not actively seeking to lease space in a building and, therefore, not using it
to conduct customary operations. It also provides an example of the lack of a regular
presence by the owner, which the Eighth Circuit in Oakdale Mall tied to the purpose
of the vacancy provision that went unfulfilled in that case.

¶45 We agree with the circuit court that Frankenthal’s ongoing, active
efforts to lease space in the Frankenthal Building are much different from the efforts
of the owner in Myers, who was not actively seeking to lease units in his apartment
building. Unlike the owner in Myers, who was present at the building once a month
and kept the building units empty, Myers, 788 F.2d at 470, Frankenthal kept the
space in the Frankenthal Building ready to lease by maintaining a regular presence
in the building once or twice a week and by furnishing one of the available spaces.
Furthermore, Frankenthal maintained its utilities and actively negotiated leases with
prospective tenants.

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No. 2023AP1841

¶46 Indeed, the owner in Myers would not have fulfilled the purpose of
the Policy’s vacancy provision given the “deserted and unsecured” nature of the
building in that case. Thus, the owner’s lack of any efforts to lease units and lack
of a regular presence in the building in Myers show that the owner there was not
using the building to conduct customary operations of seeking immediate tenants.
In contrast, Frankenthal’s continued efforts to lease space in the Frankenthal
Building and its regular maintenance of the building show that it was using the
Frankenthal Building to conduct its customary operations of seeking immediate
tenants for unleased portions of the building. What ultimately matters is that
without the Policy defining what the property owner’s customary operations are, it
is reasonable for an insured to believe such actions can be deemed part of its
customary operations.

¶47 In sum, we conclude that the term “customary operations” in the
vacancy provision of the Policy is ambiguous, and we therefore construe the Policy
in favor of coverage for Frankenthal. Had the Policy clarified what was included in
“customary operations” or, as other policies have done, identified each property’s
use or the owner’s business pursuit, the result here may have been different. See,
e.g., Pritchett v. Herman Farmers’ Mut. Ins. Co., 201 Wis. 521, 521, 230 N.W.
706 (1930) (identifying a building’s use “as is usual and incidental in the business,
as conducted therein, of warehouse and storage”); Icarus Holdings 2, LLC v.
AmGUARD Ins. Co., 601 F. Supp. 3d 314, 318, 324 (N.D. Ill. 2022) (characterizing
the owner’s business pursuit as lessor of residential buildings and dwellings). But
the Policy does not do so. As a result, we construe “customary operations” to

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No. 2023AP1841

include Frankenthal’s active, ongoing efforts to lease space in the Frankenthal
Building.9

By the Court.—Judgment affirmed.

Recommended for publication in the official reports.

9
Because we conclude that the term “customary operations,” as used in the Policy, is
ambiguous and construe the Policy in favor of coverage for Frankenthal, we need not address
West Bend’s alternative argument that it did not waive and was not estopped from invoking the
Policy’s vacancy provision as a defense to Frankenthal’s claim. See Patrick Fur Farm, Inc. v.
United Vaccines, Inc., 2005 WI App 190, ¶8 n.1, 286 Wis. 2d 774, 703 N.W.2d 707 (“[W]e decide
cases on the narrowest possible grounds.”). We also do not address Frankenthal’s alternative
argument that even if the Frankenthal Building was vacant, a concurrent cause created the loss and
Frankenthal had coverage under the concurrent cause doctrine. See id.

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