By Joe Forward, Legal Writer, State Bar of Wisconsin

Oct. 15, 2010 – The auto exclusion provision in a trucking company’s commercial general liability (CGL) insurance policy excluded coverage when a truck driver negligently ran (with his feet) across a highway, causing an accident, to assess the height of a highway underpass.

That’s what the District IV Wisconsin Appeals Court concluded in Zarnstorff v. Neenah Creek Custom Trucking, 2009AP1321 (Oct. 14, 2010), a case in which the appeals court rejected Paul and Nadine Zarnstorff’s attempt to make Acuity Insurance Company pay additional damages under the Neenah Creek Custom Trucking Company’s (Neenah Trucking) CGL policy.

A Neenah Trucking employee was driving a tractor-trailer down I-39 and came to a complete stop in the right lane, blocking traffic, in order to check the height of an upcoming highway underpass. Another employee, driving behind the truck, pulled off, exited the car and ran across two highway lanes to check the underpass height.

On his way back across, an oncoming car slammed on the brakes to avoid hitting the highway-dashing employee and the Zarnstorff’s rear-ended the car. Paul Zarnstorff sustained major injuries, and Nadine Zarnstorff sustained minor ones. After trial, the jury awarded the Zarnstorffs $1.9 million, which was reduced to $1.5 million based on contributory negligence.

Without dispute, Acuity paid the Zarnstorffs $995,000 under Neenah Trucking’s commercial auto policy, and the Zarnstorffs agreed not to collect the balance from Neenah Trucking or its employees. The Zarnstorff’s then sought the balance of the judgment under the CGL policy.

Acuity contended the CGL “did not provide coverage because of the exclusion for ‘[b]odily injury or property damage arising out of the … use … of any … auto … owned or operated by … any insured. Use includes operation and loading or unloading.’”

The Zarnstorffs argued that crossing the highway in front on oncoming traffic did not constitute “use” of the truck under the meaning of the exclusion provision. In addition, the Zarnstorffs argued that Acuity should be stopped from denying coverage “because it failed to produce the CGL policy before or during trial in response to discovery requests.”

The circuit court concluded that running across the highway in front of oncoming traffic to check the height of the underpass constituted “use” of the truck, and therefore, the CGL’s auto exclusion applied to preclude coverage. The Zarnstorffs appealed.

Appeal 

The auto exclusion in the CGL policy does not apply, the Zarnstorffs argued, because under Lawver v. Boling, 71 Wis. 2d 408, 238 N.W.2d 514 (1976), running across the highway was an “independent concurrent cause of their injuries.”

Acuity argued that such conduct was not an independent concurrent cause of the injuries “because it arose out of the use of the vehicle and therefore comes within the exclusion.”

The crux of the issue in Lawver was whether injuries, sustained when someone fell off a platform that was tied to a truck by a rope, “arose out of use of the truck.”

In Lawver, the appeals court explained, the Wisconsin Supreme Court adopted the rationale that “if an accident is caused jointly by an excluded risk [use of truck] and an insured risk [non-use of truck], the exclusion in the policy for the one does not exclude the other.”

Under Lawver, the Zarnstorff’s argue, “’when the issue is whether a loss is excluded by an auto exclusion, the inquiry is whether there was an independent concurrent cause.’” They argued the circuit court erred because “it did not make this inquiry.”

But the appeals court held that the “independent concurrent cause analysis does not apply unless some injury-causing conduct does come within the language of the exclusion while other injury-causing conduct does not.”

“The independent concurrent cause doctrine comes into play after it is determined that there is injury-causing conduct that does not come within the exclusion,” the appeals court wrote.

Running across the highway was injury-causing conduct that comes within the exclusion, and therefore the independent concurrent cause doctrine does not come into play, because crossing the highway “’arises out of’ the use of the semi,” the court concluded.

“[T]he term ‘arises out of’ has a broad meaning and commonly understood to mean ‘originating from, growing out of, or flowing from,” the court explained. “[T]he activity of assessing a potential obstacle to a vehicle traveling on the highway from a vantage point outside the vehicle is an activity that flows from or arises out of the use of the vehicle.”

The appeals court affirmed the circuit court by concluding that the CGL auto exclusion applied to the negligent act of running across the highway, thereby precluding coverage.

Finally the appeals court rejected the Zarnstorffs’ argument that Acuit was stopped from precluding coverage because it did not disclose the CGL policy in response to discovery requests.

Ultimately, the appeals court concluded that the Zarnstorffs were unsuccessful in persuading the it that the circuit court “erroneously exercised its discretion in deciding not to sanction Acuity by precluding it from contesting coverage under the CGL policy.”

However, the appeals court offered a disclaimer: “This decision should not be read to suggest any weakening of the obligation of insurers and their insureds – like all other persons and parties served with discovery – to comply with the requirements” of Wis. Stat. sections 804.08 through 804.11.