Continental Properties Company, Inc. v. Hiscox Insurance Company, Inc.

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.
December 17, 2025
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. 2024AP197 Cir. Ct. No. 2020CV248

STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT II

CONTINENTAL PROPERTIES COMPANY, INC., CONTINENTAL 335 FUND
LLC, CONTINENTAL 355 FUND LLC, CONTINENTAL 235 FUND LLC,
CONTINENTAL 342 FUND LLC, CONTINENTAL 326 FUND LLC,
CONTINENTAL 298 FUND LLC, CONTINENTAL 332 FUND LLC AND
CONTINENTAL 347 FUND LLC,

PLAINTIFFS-APPELLANTS,

V.

HISCOX INSURANCE COMPANY, INC.,

DEFENDANT-RESPONDENT.

APPEAL from a judgment of the circuit court for Waukesha County:
MICHAEL J. APRAHAMIAN, Judge. Affirmed.

Before Gundrum, Grogan, and Lazar, JJ.
No. 2024AP197

Per curiam opinions may not be cited in any court of this state as precedent

or authority, except for the limited purposes specified in WIS. STAT. RULE 809.23(3).

¶1 PER CURIAM. In this insurance coverage case, Continental
Properties Company, Inc. (Continental Properties), et al., appeal from a circuit
court judgment, entered on summary judgment, in favor of Hiscox Insurance
Company, Inc. (Hiscox). They had accused Hiscox of breach of contract and bad
faith with regard to a commercial crime insurance policy it had issued. For the
reasons that follow, we affirm.

BACKGROUND

¶2 Continental Properties is a Wisconsin company that develops and
builds apartment communities across the country.1 In 2007, it hired Angelo
Eguizabal as its Vice President of Construction. In that role, Eguizabal was
responsible for identifying and proposing general contractors to work with on
various projects.

¶3 Prior to his employment at Continental Properties, Eguizabal worked
with an individual named David Albertelli. In 2011, Albertelli contacted
Eguizabal about a new company he had formed called Albertelli Construction, Inc.
(ACI). Soon thereafter, ACI began providing consulting and construction services
to Continental Properties.

¶4 In 2013, in an effort to incentivize Eguizabal to steer more business
to ACI, Eguizabal and Albertelli entered into a “Commission Sales Agreement”

1
The other appellants are project-specific limited liability companies formed and owned,
in part, by Continental Properties. They were all insured under Hiscox’s policy.

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No. 2024AP197

(CSA). Under its terms, ACI agreed to compensate Eguizabal for delivering
Continental Properties’ construction contracts to ACI. For multifamily contracts,
ACI agreed to pay Eguizabal a “commission” of two percent of the total contract
amount. ACI also allowed Eguizabal to retain any payments for change orders
that exceeded the actual costs of executing the change order.2 Finally, ACI
permitted profit sharing on projects, assuming that the profits exceeded a certain
threshold. It is undisputed, however, that this last provision was never triggered.

¶5 In 2015, Continental Properties grew dissatisfied with ACI’s work
and stopped awarding it contracts. According to Eguizabal, Albertelli affiliated
himself with an existing contractor in California named Westcore Construction,
LLC (Westcore), in the hopes of secretly continuing to work with Continental
Properties. Eguizabal concealed this fact from Continental Properties, as he
believed he would still receive payments from Westcore under the CSA.
Continental Properties ended up hiring Westcore on several projects, which
allegedly lost millions of dollars.

¶6 Eventually, Continental Properties became aware of both the CSA
and Albertelli’s relationship with Westcore. It fired Eguizabal and terminated its
projects with Westcore. It also filed a lawsuit in federal court against Eguizabal,
Albertelli, ACI, and Westcore, among others, alleging civil theft, fraud,
conversion, theft by contractor, breaches of contracts, professional negligence, and
claims under the Racketeering Influenced and Corrupt Organizations Act.

2
The CSA contemplated that the change orders be legitimate. Indeed, Eguizabal
testified that he never approved a change order that served no purpose.

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¶7 To secure his dismissal from the federal lawsuit, Eguizabal entered
into a cooperation agreement with Continental Properties. Pursuant to that
agreement, Eguizabal paid Continental Properties the monies he received under
the CSA, which totaled $1,645,881.27.

¶8 In 2017, Continental Properties and its project-specific limited
liability companies (collectively, the appellants) filed a proof of loss with their
insurer Hiscox for losses ostensibly stemming from Eguizabal’s conduct. Hiscox
had issued a commercial crime insurance policy insuring against employee theft.

¶9 Ultimately, Hiscox denied the appellants’ claim, contending that it
fell outside the scope of the insurance policy’s coverage. The appellants then filed
this action against Hiscox, accusing it of breach of contract and bad faith.

¶10 After discovery, the parties filed competing motions for summary
judgment. Following briefing and a hearing on the matter, the circuit court
granted Hiscox’s motion and dismissed the action. The court determined that the
appellants had not demonstrated a covered loss under the insurance policy. The
appellants now appeal. Additional facts are set forth below.

DISCUSSION

¶11 We review a grant of summary judgment de novo, applying the same
standard as the circuit court. Green Spring Farms v. Kersten, 136 Wis. 2d 304,
315, 401 N.W.2d 816 (1987). Summary judgment is appropriate if there are no

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genuine issues of material fact and one party is entitled to judgment as a matter of
law. WIS. STAT. § 802.08(2) (2023-24).3

¶12 The interpretation of an insurance policy is a question of law that we
also review de novo. Everson v. Lorenz, 2005 WI 51, ¶10, 280 Wis. 2d 1, 695
N.W.2d 298. In a claim for coverage under a policy, the insured bears the burden
of showing initial coverage for the alleged loss. American Fam. Mut. Ins. Co. v.
Schmitz, 2010 WI App 157, ¶8, 330 Wis. 2d 263, 793 N.W.2d 111.

¶13 We begin our analysis with the insurance policy at issue. Hiscox’s
policy to the appellants provides: “We will pay for loss of or damage to Money,
Securities and Other Property resulting directly from Theft and/or Forgery
committed by an Employee, whether identified or not, acting alone or in collusion
with other persons.” (Emphasis in original.) The policy defines “Theft” to mean
“the unlawful taking of property to the deprivation of the Insured.”

¶14 Per the language of the insurance policy, coverage applies to loss for
theft “committed by an Employee,” either acting alone or in collusion with others.
Thus, for there to be coverage, the loss must result from a theft involving the
employee. As the circuit court explained:

If the employee is not directly involved in the theft, or if
the alleged loss results from actions of others with whom
the employee colluded but not tied directly to an
employee’s unlawful taking, then there is no coverage
under the Policy. [However], losses beyond those seized
by an employee may still be covered under the Policy if the
losses directly result from the employee’s unlawful taking
aided by others, even if the monies went to people other
than the employee.

3
All references to the Wisconsin Statutes are to the 2023-24 version.

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¶15 The other limitation on coverage is the language that promises
payment for loss “resulting directly from Theft.” When interpreting such
language, Wisconsin courts have aligned themselves with the “direct means
direct” rule and reject the contention that “direct” is synonymous with “proximate
or substantial cause.” See Universal Mortg. v. Wurttembergische Versicherung
AG, 651 F.3d 759, 761-62 (7th Cir. 2011). This was made clear in the case of
Tri City National Bank v. Federal Insurance Co., 2004 WI App 12, 268 Wis. 2d
785, 674 N.W.2d 617.

¶16 In Tri City, two Tri City bank employees engaged in a scheme to
fraudulently obtain mortgage loans for unqualified borrowers. Id., ¶2. The
scheme was discovered years later after multiple borrowers defaulted on the loans.
Id. The mortgage companies sued Tri City, and the suits resulted in settlements.
Id., ¶¶3-5. Tri City then sought a declaratory judgment that its insurer, Federal
Insurance Co., was obligated to indemnify it for the settlement payments pursuant
to a fidelity bond Federal Insurance Co. had issued. Id., ¶5. Through the course
of that litigation, we interpreted language which stated that the bond covered,
“Loss resulting directly from dishonest or fraudulent acts committed by an
Employee[.]” Id., ¶15 (emphasis added). Despite Tri City’s contention that this
language was ambiguous, we determined otherwise, stating:

First, the bond clearly restricts indemnification to those
losses that occur as a direct result of an employee’s
dishonest acts. This language is not susceptible to more
than one meaning. Here, the loss was not direct. It was
only after the mortgage defaults occurred, some three years
after the employees’ deceitful actions, that Tri City’s
liability to the mortgage companies came into being. The
losses did not “result[] directly from dishonest or
fraudulent acts committed by employe[es,]” as the losses
did not exist until the unsuitable mortgage holders
defaulted on their loans and the mortgage companies sued
Tri City.

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No. 2024AP197

Id., ¶18 (alterations in original; emphases added; footnote omitted). We
continued:

Tri City’s losses—the settlements with the mortgage
companies—are not the direct result of the employees’
dishonesty; the employees were dishonest by permitting
financially inappropriate people to obtain mortgages from
other entities, not the employer bank. Thus, the bank
initially lost nothing as a result of their dishonesty. It was
only after the unsuitable mortgagees defaulted on their
loans and the mortgage companies sued Tri City that
“losses” resulted.

Id., ¶24 (emphasis added).

¶17 The insurance policy at issue here, of course, is even more restrictive
than the one addressed in Tri City. That is because it does not include coverage
for “dishonest” acts.

¶18 With the foregoing in mind, we turn to the alleged losses identified
by the appellants in the circuit court. Those alleged losses fall into four
categories: (1) inflated contract payments to fund the two percent commission
promised to Eguizabal under the CSA; (2) Continental Properties’ payments to the
Albertelli entities that were intended for subcontractors/vendors, but which were
retained by Albertelli, causing Continental Properties to have to make additional
payments; (3) Continental Properties’ payments to the Albertelli entities for work
they represented was complete, but was never performed, causing Continental
Properties to have to make additional payments; and (4) losses from the Westcore
projects, which would not have occurred but for Eguizabal’s fraudulent
concealment of Albertelli’s relationship with Westcore. We consider each one in
turn.

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¶19 The first category of alleged losses is inflated contract payments to
fund the two percent commission promised to Eguizabal under the CSA.
According to the appellants, Eguizabal would embed the two percent commission
in each of Continental Properties’ contracts with the Albertelli entities, making
them more expensive than they would otherwise be.

¶20 Although we agree that Eguizabal’s purported conduct could
constitute “Theft” under the insurance policy, we are not persuaded that the
appellants have demonstrated a loss attributable to it. To begin, Eguizabal
returned the monies he received under the CSA as part of a cooperation
agreement. Moreover, his alleged actions involved providing confidential
information, including other contractors’ bids, to the Albertelli entities in order to
let them “get to the number that they needed to get to” to secure Continental
Properties’ contracts. Had Eguizabal not worked to surreptitiously undercut other
contractors’ bids, then Continental Properties would have likely secured another
contractor with a higher bid—higher even than a bid with the two percent
commission included.4

¶21 The appellants’ expert witness did not take any of this into account
in her report on damages. Indeed, she did not calculate any losses associated
directly with the two percent commission.5 As such, the alleged inflation of

4
Eguizabal needed to undercut other contractors’ bids because he lacked the authority to
hire the Albertelli entities himself. Such authority rested with Continental Properties’ investment
committee.
5
The appellants’ expert witness instead focused on losses tied to duplicative payments
made to subcontractors, payments made to correct defective and incomplete work, and payments
made to satisfy liens.

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contract payments by the two percent commission is, at best, theoretical and not
supported by evidence from which a factfinder could rely.

¶22 The next category of alleged losses is Continental Properties’
payments to the Albertelli entities that were intended for subcontractors/vendors,
but which were retained by Albertelli, causing Continental Properties to have to
make additional payments. The appellants accuse Eguizabal of creating an
environment that allowed this to happen.6

¶23 We are not convinced that this second category of alleged losses is
covered under the insurance policy. After all, the losses did not result directly
from a theft involving Eguizabal. Rather, they resulted from a separate decision of
Albertelli not to pay the subcontractors/vendors and instead retain the payments
himself (effectively committing theft by contractor). Such a decision, which is not
contemplated in the CSA, is too far removed from Eguizabal to satisfy the direct
causation rule of Tri City.

¶24 The next category of alleged losses is Continental Properties’
payments to the Albertelli entities for work they represented was complete, but
was never performed, causing Continental Properties to have to make additional
payments. Again, the appellants accuse Eguizabal of creating an environment that
allowed this to happen.

¶25 This third category of alleged losses fails for the same reason as the
second category. That is because the alleged losses did not result directly from a

6
In particular, the appellants fault Eguizabal for certain actions (e.g., accelerating
payments to the Albertelli entities and allowing them to operate outside of Continental Properties’
electronic payment system) that arguably made it easier for Albertelli to commit wrongdoing.

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No. 2024AP197

theft involving Eguizabal. Instead, they resulted from the Albertelli entities’
subsequent failure to perform their promised obligations under contract. Again,
that failure is too far removed from Eguizabal to satisfy the rule of Tri City.

¶26 The final category of alleged losses is from the Westcore projects,
which would not have occurred but for Eguizabal’s fraudulent concealment of
Albertelli’s relationship with Westcore. The appellants seek to recover all of their
losses on those projects.

¶27 As noted by the circuit court, fraudulent concealment—i.e., not
alerting Continental Properties of Albertelli’s relationship with Westcore—is not
theft and therefore not covered by the insurance policy. But even if it could be
considered theft, the alleged losses did not result directly from it. At the time
Westcore was hired, it could have completed the projects without the appellants
incurring a loss. That is, everything could have gone according to plan despite
Albertelli’s involvement. As a result, we cannot say that the losses resulted
directly from Eguizabal’s conduct as required by Tri City.

¶28 In the end, because the appellants have failed to meet their burden of
showing initial coverage for the alleged losses under the insurance policy, we are
satisfied that the circuit court properly dismissed their action on summary
judgment. Accordingly, we affirm.7

7
To the extent we have not addressed an argument raised by the appellants on appeal,
the argument is deemed rejected. See State v. Waste Mgmt. of Wis., Inc., 81 Wis. 2d 555, 564,
261 N.W.2d 147 (1978).

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No. 2024AP197

By the Court.—Judgment affirmed.

This opinion will not be published. See WIS. STAT.
RULE 809.23(1)(b)5.

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