July 25, 2014 – An employee at Menard Inc. was loading a customer’s truck with lumber when some boards fell and injured the customer’s foot. Now, the customer’s auto insurer must defend and indemnify Menard, the Wisconsin Supreme Court has ruled.

American Family Mutual Insurance, which insured plaintiff Vicki Blasing’s truck, argued that Menards’ general business liability insurer should defend and indemnify Menard, liable as employer. Holding otherwise would lead to an absurd result, they argued.

But in Blasing v. Zurich American Insurance Co., 2014 WI 73 (July 17, 2014), a 4-3 majority ruled that American Family is on the hook, concluding that the employee was “using” the customer’s truck and was therefore an “insured” under the auto policy.

“Several Wisconsin cases have held that the named insured under an automobile liability insurance policy is not precluded from recovering on the policy when an additional insured, while using the vehicle within the terms of the policy, inflicts injury upon the named insured,” wrote Chief Justice Shirley Abrahamson for the majority.

What Happened?

In 2008, Blasing went to a Menard store in Johnson Creek to pick up lumber. She parked her truck in the lumberyard, where an employee used a forklift to load the truck. Blasing was standing near the truck, and some of lumber fell onto her foot.

Blasing sued Menard, alleging negligence and a violation of Wisconsin’s safe place statute. Menard argued that American Family should defend and indemnify Menard because the employee tortfeasor was actually an “insured” under Blasing’s auto policy.

The circuit court sided with American Family, concluding the policy did not contemplate coverage of a permissive user tortfeasor who injured the actual policyholder. The appeals court reversed. Recently, the supreme court affirmed the appeals court.

Majority Rules

The majority noted that the American Family policy covered damages that an “insured person” was legally liable to pay due to the “use” of an insured vehicle. In addition, the policy does not exclude liability damages for injuries sustained to an insured person.

Insured persons include “persons using the insured car with the named insured’s permission,” the majority noted. Menard argued that its employee was an “insured” because the employee had permission to load the truck with lumber.

The majority noted that “use of a vehicle” in these circumstances is not limited to driving the car, noting other cases involving the “use” of a car outside the driving context.

For instance, in Lawver v. Boling, 71 Wis. 2d 408, 238 N.W.2d 514 (1976), the court ruled that operating a pulley system attached to the truck was considered “using” the truck for purposes of determining whether the pulley operator was an insured person.

“Similarly, we conclude 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,” wrote the chief, Joined by Justices Ann Walsh Bradley, Patrick Crooks, and David Prosser.

Because the Menard employee was an insured person under the policy, the majority also ruled that American Family had a duty to defend and indemnify Menard. This result is not absurd, as American Family argued, nor is it anomalous, the majority explained.

“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,” Chief Justice Abrahamson wrote.

American Family argued that Menard is covered under a general business liability policy, but the majority noted that “it is not for this court in the present case to assign relative responsibility to the insurance companies for indemnification or defense.”

The majority did not rule on whether Wisconsin’s omnibus statute allows an insurer to exclude coverage of liability when the injured party is also an insured person.

“Past cases inform us that we should not rule on the omnibus statute without the exact language of the exclusion proposed, the facts of the case, and briefs and oral argument – none of which is present here with regard to this issue,” the chief justice wrote.

Dissent

Justice Patience Roggensack wrote a 17-page dissent, joined by Justices Michael Gableman and Annette Ziegler. They concluded that since Blasing commenced a direct action against Menard and its insurer, Menard’s insurer must provide the defense.

The majority sidestepped this issue, Roggensack noted: “I conclude that the majority opinion should not avoid American Family’s stated issue, but rather, address it and conclude that when a direct action has been commenced against the insurer of a named defendant, as is the case here, the defendant’s insurer must provide the defense unless that insurer first can prove there is no coverage for any of the claims made.”