Aug. 17, 2026 – The dispute in Cincinnati Insurance Co. v. Ropicky, 2026 WI 25, will return to circuit court after the Wisconsin Supreme Court held that damage from rain, but not damage resulting from the construction defect, was recoverable as an “ensuing loss.”
Justice Brian K. Hagedorn, writing for the 4-3 majority, said it was adopting Arnold v. Cincinnati Insurance Co., 2004 WI App 195, because it is “more consistent with normal language: that to ensue means to follow as ‘chance, likely, or necessary consequence.’”
“The policy language simply does not suggest a narrow, proximate-cause like meaning.”
Chief Justice Jill J. Karofsky, Justice Rebecca Frank Dallet, and Justice Janet C. Protasiewicz joined the majority opinion.
Jay D. Jerde, Mitchell Hamline 2006, is a legal writer for the State Bar of Wisconsin, Madison. He can be reached by email or by phone at (608) 250-6126.
After interpreting policy terms, the majority held that disputes of material fact remain for Waukesha County Circuit Court to resolve.
Justice Annette Kingsland Ziegler’s dissent, joined by Justice Rebecca Grassl Bradley and Justice Susan M. Crawford, argued that the majority erroneously applied Arnold.
“The court’s approach to the ensuing-loss doctrine exception expands Arnold’s scope to cover losses beyond the terms of the parties’ insurance policy, unnecessarily broadening Wisconsin’s ensuing-loss jurisprudence in its wake.”
Water Pouring In
Storms on the morning of May 18, 2018 brought rainwater pouring into the house owned by James Ropicky – something he had never experienced. The house was built in 2005.
The investigation by Ropicky’s homeowner’s policy insurer, Cincinnati Insurance Co., discovered “multiple construction defects” that resulted in gaps that the rain went through.
The damage from rain and mold began before the recent storm and included “nearly every storm event,” the engineer hired by the insurance company said.
The policy excluded damage from construction defects but not “ensuing losses” from the defect.
Although the policy also excluded losses caused by fungi, Ropicky had purchased $10,000 in additional coverage.
The insurance company agreed to pay $2,138.53 for the damaged walls and the full amount of the Fungi Additional Coverage.
Ropicky discovered “more extensive” damage during repairs. He contacted his insurer to reevaluate the claim. The engineer determined the damage came from construction defects. The insurer didn’t offer any more for the claim.
The insurer sued first, seeking a declaratory judgment that “the Construction Defect Exclusion and the Fungi Exclusion barred” further coverage.
In Ropicky’s counterclaims for breach of contract and bad faith, he claimed damages of $1,030,300.
His expert witnesses disputed the engineer’s conclusions and methodology, which lacked “typical diagnostic tools” and sampling. The engineer had an ongoing business relationship with the insurance company.
Ropicky’s experts considered more likely that water saturation damaged the house from “straight-line winds or wind-blown rain.”
The insurance company argued that “this very significant amount of water intrusion does not and should not occur in a properly designed and constructed house.”
The circuit court granted partial summary judgment to the insurance company. The court of appeals reversed.
Ensuing Loss
“The coverage provided by ensuing loss exceptions varies from policy to policy,” the majority explained, resulting in significantly different cases.
“This language has proved troublesome for courts to make sense of.”
The court of appeals applied Arnold, which held “an ensuing loss is a loss that is not directly caused by faulty workmanship or faulty materials, but nonetheless follows as a ‘chance, likely, or necessary consequence’ of the loss caused by faulty workmanship or faulty materials.”
A reasonable person, the Arnold court said, would understand “an ensuing loss must result from a cause in addition to the excluded cause.”
In Arnold, the deterioration caused directly by the contractor’s work couldn’t be covered. Rain leaking through damaged caulking “constituted a cause in addition to the faulty workmanship” and was covered, the majority explained.
“Arnold’s interpretation is reasonable and deserves some prudentially grounded respect” because of long-term reliance, the majority said, and it strikes the proper balance “by requiring an additional cause of loss to trigger the ensuing loss exception.”
In Ropicky’s claim, “rain, just like in Arnold, was an additional cause.” Rainwater entry created “chance, likely, or necessary consequence of the excluded loss” and “a cause in addition to the excluded cause.”
Similarly, American Family Mutual Insurance Co. v. American Girl, Inc., 2004 WI 2, advised the majority that “the exclusion ‘would operate to exclude coverage … but for the exception that specifically restores coverage.’”
The Fungi Additional Coverage acts as an exception to the Fungi Exclusion, allowing recovery of up to $10,000 for damages caused by fungi, the majority held.
Because “the record here does not conclusively establish the existence of the disputed construction defect, nor does it determine the scope of damages such a defect may have caused,” the majority reversed the summary judgment.
Justice Ziegler Dissent: Majority Abandons Arnold
“In the two decades since Arnold was decided, courts have reached a consensus on this question, and the resulting majority rule of these courts accords with a proper reading of Arnold,” Justice Ziegler said in dissent.
“Unfortunately, the majority has failed to properly apply or clarify Arnold.”
“[T]he majority fails to distinguish between rain damage caused by the construction defect and rain damage that would have occurred to a properly constructed house,” Justice Ziegler distinguished.
The insurance policy excludes harm from defective construction, which Justice Ziegler explained “encompasses both (1) the defect itself and (2) the damages caused by the defect.”
Two separate events are required for the “ensuing loss” exception to apply.
The classic example of how the coverage works is historical, Justice Ziegler described. In the San Francisco Earthquake and Fire of 1906, homeowner’s policies excluded earthquake damage. The policies covered damage from the fire caused by the earthquake.
Critical to Arnold’s analysis, Justice Ziegler said, was Richland Valley Products Inc. v. St. Paul Fire & Casualty Co., 201 Wis. 2d 161 (Ct. App. 1996), which excluded from coverage “the downstream effects of the original defect.”
In Arnold, damage from the contractor’s misuse of the pressure washer wasn’t covered, but rain damage from contractor-damaged caulking “was a separate ‘cause in addition to the excluded cause,’” Justice Ziegler emphasized.
The losses that Ropicky suffered all derived from rain damage from the construction defect, Justice Ziegler concluded.
“In other words, the majority does not follow Arnold; it expands it beyond recognition.”
Homes are built for shelter, Justice Ziegler said, and any construction defect in a home, especially in Wisconsin’s climate, will likely result in damage from the elements.
Recovery for damage because of construction defects comes from the construction company, and its insurer, Justice Ziegler advised.
This article was originally published on the State Bar of Wisconsin’s Wisbar Court Review blog, which covers case decisions and other developments in the Wisconsin Supreme Court, the Wisconsin Court of Appeals, and the U.S. Court of Appeals for the Seventh Circuit. To contribute to this blog, contact Joe Forward.