The Wisconsin Supreme Court recently expanded the scope of coverage under auto policies when it held an auto insurer must defend and indemnify a permissive user of the auto who is sued by the named insured. Blasing v. Zurich Amer. Ins. Co., 2014 WI 73, aff’g 2013 WI App 27, 346 Wis.2d 30, 827 N.W.2d 909. The Court rejected the auto insurer’s argument that an absurd result would arise by requiring the auto insurer to defend and indemnify a permissive user tortfeasor when the injured victim is the policy’s named insured. This decision continues the Court’s recent trend of issuing decisions that sometimes favor injured parties over insurance carriers. The result is surprising because the permissive user in this case had ample coverage if he is found liable.
The case arose from an accident in the lumberyard of a Menards store. A Menards’ employee used a forklift to place purchased lumber into the plaintiff’s pickup truck. The plaintiff stood near the rear passenger side of his pickup truck while the Menards’ employee attempted to place the lumber in his truck and some of the lumber fell on the plaintiff’s foot. The plaintiff’s truck was insured by American Family and Menards’ liability insurer was Zurich American Insurance.
Plaintiff sued Menards and Zurich; it was undisputed that the Zurich policy would fully indemnify Menards if the plaintiff proved her case against Menards. Menards tendered its defense to American Family, which agreed to defend Menards under a reservation of rights. American Family intervened, obtained a stay, and moved for a summary judgment ruling that it was not required to defend or indemnify Menards. For their part, Menards and Zurich moved for declaratory judgment that American Family had a duty to defend and indemnify Menards. The circuit court granted American Family’s motion and denied the Menards/Zurich motion. The circuit court entered a final order dismissing American Family; Menards and Zurich appealed.
The Court of Appeals reversed the circuit court in a 3-0 decision. The Court of Appeals relied on Wisconsin’s omnibus statute, Wis. Stat. § 632.32, which requires that auto insurance policies provide additional vehicle users the same protection as afforded the named insured. The Court of Appeals held the omnibus statute requires that any permissive user of an insured’s vehicle must be extended coverage in the same manner as coverage is extended to the named insured. 2013 WI App 27 ¶ 33.
The Supreme Court affirmed the Court of Appeals in a 4-3 decision. The Court did not, however, rely on an application of the omnibus statute.
The majority first looked at whether the Menards’ employee’s actions constituted use of the pickup truck under the terms of the American Family policy. The policy defined “insured person” as “[a]ny person using your insured car” and “use” as “ownership, maintenance, or use.” The policy provided that American Family will indemnify and defend an insured person for “bodily injury and property damage due to the use of a car or utility trailer.” Importantly, the policy did not exclude liability for injuries sustained by an insured person.
The majority held that “use of a vehicle” is not limited to driving the auto and discussed other decisions involving the “use” of an auto outside the driving context. The majority concluded that “loading an insured pickup truck with lumber is reasonably contemplated by the insured and insurer because it is consistent with the ordinary transportation of persons and goods inherent in the purpose of the pickup truck.” 2014 WI 73 ¶ 41.
Secondly, the majority considered whether the American Family policy requires it to defend and indemnify a permissive user tortfeasor when the injured victim is a named insured. American Family argued that requiring coverage would be an absurd result.
The majority disagreed and held that such a result is neither absurd nor anomalous. The majority explained that the “American Family policy treats all insureds alike, including the named insured and the permissive user, covering all of them for liability to another, regardless of whether the victim is also an insured.” ¶ 52.
Finally, the majority considered the Court of Appeals’ holding that the omnibus statute requires an auto policy to provide permissive user tortfeasor coverage when the permissive user insures a named insured. If that were the case, no policy could exclude coverage for personal injures suffered by the named insured. The majority declined to rule on whether Wisconsin’s omnibus statute allows an insurer to exclude coverage when the injured party is also an insured person. The majority explained that because the policy at issue contained no such exclusion, considering that argument would be premature.
The dissent criticized the majority for focusing on potential coverage under the auto policy without first deciding whether the policy of the named defendant (Zurich) provided coverage.
Insurers in this state should pay heed to this decision. CGL insurers, when faced with an accident during loading/unloading, should analyze whether their insured’s employee is covered under the injured party’s auto policy as a permissive user. Beyond the loading/unloading of goods, this could even extend to a health care setting, in which a hospital employee drops a patient while transferring the patient from a wheelchair into the patient’s auto.
Auto insurers should be aware they now face increased exposure in the loading/unloading situation. The exposure arises most significantly in situations where, unlike in Blasing, the at-fault tortfeasor may have no coverage of their own. An example would be a friend of the named insured, while assisting the named insured in a move, drops furniture on the named insured. To reduce this exposure, auto insurers should consider amending policies to include an exclusion of coverage for personal injuries suffered by the named insured. Such exclusions would not be barred by the decision in Blasing although those exclusions would certainly face an omnibus statute challenge.
If you should have any questions regarding this article, please contact Gary Wickert at [email protected].