This past July the Supreme Court decided Blasing v. Zurich American Insurance Company, 2014 WI 73. At issue was whether the plaintiff's insurance company had a duty to defend and possibly indemnify Menard, Inc. under the plaintiff's automobile liability policy.
The plaintiff, Ms. Blasing, had an automobile insurance policy with American Family Mutual Insurance Company. The plaintiff was injured when a Menard employee was loading lumber into the plaintiff's vehicle. Menard tendered the defense of the plaintiff's claims to American Family. Menard argued that the employee was a permissive user under the American Family policy because the employee was using the plaintiff's vehicle at the time of the accident.
Coverage was Extended to Menard Despite the Seemingly Absurd Results
American Family and Wisconsin Insurance Alliance argued that extending coverage to Menard would create absurd results. First, “American Family would be required to defend and possibly indemnify a tortfeasor who has injured the premium-paying named insured policyholder.” 2014 WI 73, ¶45. Second, “automobile liability insurance polic[ies] ordinarily cover the liability of an insured for injury to third parties who are not insureds under the policy . . . .” Id. ¶49. Third, “providing coverage under an automobile liability insurance policy for a permissive user tortfeasor who allegedly negligently injures a named insured seems to provide greater coverage to the permissive user than to the named insured herself.” Id. ¶51. Lastly, “the Menard employee and Menard ha[d] liability insurance coverage with Zurich Insurance covering any possible liability to the plaintiff.” Id. ¶53.
Despite the above anomalies or absurdities, the Court reasoned that extending coverage under the circumstances in Blasing was not novel or absurd. The Court noted that several Wisconsin cases have held that a “named insured under an automobile insurance policy is not precluded from recovering on the policy when an additional insured inflicts injury upon the named insured while using the vehicle within the terms of the policy.” Id. ¶55.
The Court Did Not Provide Clarification on the Scope of Wis. Stat. § 632.32(3)
The Court missed the opportunity to clarify whether the omnibus statute, Wis. Stat. § 632.32(3), requires a plaintiff's own liability insurer to defend and possibly indemnify a defendant who injured the plaintiff when the defendant has its own liability insurance. The Court declined to specifically address the question. Id. ¶66. The Court reasoned that it could not “rule on a proposed exclusion without knowing the precise language of the exclusion and the facts to which the exclusion is applied.” Id.
There are two significant implications to the Court's decision. First, there will be more attempts by defendants and their insurers to tender the defense to a plaintiff's insurance company when the defendant tortfeasor could be considered an additional insured under the plaintiff's insurance policy. Second, without clarification on the scope of Wis. Stat. § 632.32(3), automobile insurers are left with few options to protect themselves against the type of situation that arose in Blasing.
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