Barber v. Nylund
| Decision Date | 18 September 1990 |
| Docket Number | No. 89-2253,89-2253 |
| Citation | 461 N.W.2d 809,158 Wis.2d 192 |
| Parties | Susan M. BARBER, Plaintiff, v. Craig A. NYLUND, Defendant-Appellant, Rural Mutual Insurance Company, Defendant-Respondent, Transamerica Insurance Corporation of America, a foreign insurance corporation, and Rural Security Life Insurance Company, Defendants. |
| Court | Wisconsin Court of Appeals |
Michael J. Kranzush of Denissen, Kranzush, Mahoney & Ewald, S.C., Green Bay, for defendant-appellant.
Susan J. Reigel of Everson, Whitney, Everson & Brehm, S.C., Green Bay, for defendant-respondent, Rural Mut. Ins. Co.
Before CANE, P.J., and LaROCQUE and MYSE, JJ.
Craig Nylund, a defendant in a personal injury case, appeals both a summary judgment in favor of Rural Mutual Insurance Company and an order denying Nylund's own motion for summary judgment. The trial court found that Nylund was not covered by a Rural Mutual automobile insurance policy at the time of the accident that injured the plaintiff, Susan Barber, and also that Rural Mutual had not waived its right to contest coverage when refusing to defend Nylund.
Nylund contends the trial court erred by ruling that Rural Mutual had not waived its right to contest coverage under the rule of Professional Office Bldgs. v. Royal Indem. Co., 145 Wis.2d 573, 427 N.W.2d 427 (Ct.App.1988). We conclude that when the insurer makes a timely denial of coverage and a timely demand for a bifurcated hearing on the coverage issue, it has not waived its right to contest coverage. The judgment and order of the trial court is affirmed.
Nylund was driving a car owned by its other occupant, Barber, when the car left the roadway, severely injuring her. Barber sued Nylund and his insurer, Transamerica Insurance Corporation of America. Transamerica filed an answer on behalf of Nylund. Barber also alleged that Nylund was covered under her family's Rural Mutual policy because the car was a replacement vehicle and he was a permissive user of the vehicle. 1 Rural Mutual filed a separate answer on behalf of Nylund, but denied coverage on the grounds that Barber's car was not owned by its insured and therefore not a replacement vehicle for the car originally covered, her father's. Nylund tendered his defense to Rural Mutual. Rural Mutual rejected the tender and took no action to defend Nylund.
Nylund moved the court to find that Rural Mutual had breached its duty to defend and therefore had waived its right to contest coverage. The trial court rejected this argument. On Rural Mutual's motion for summary judgment, the trial court found that Barber's car was not a replacement vehicle under the policy, and thus no coverage existed. The court's legal conclusion that there was no coverage is not contested on appeal. Instead, Nylund contends on appeal that the trial court erred by failing to find a waiver of Rural Mutual's right to contest coverage.
Whether the remedy of waiver of an insurer's right to contest coverage is available under particular circumstances is a question of law. See Professional Office Bldgs., 145 Wis.2d at 580, 427 N.W.2d at 429. This court decides questions of law without deference to the trial court. Id. Insurance policies impose a duty on the carrier to defend its insured on the action for damages and a duty to indemnify the insured should liability be found. Gross v. Lloyds of London Ins. Co., 121 Wis.2d 78, 84, 358 N.W.2d 266, 269 (Ct.App.1984). An insurance carrier's duty to defend arises when the third party's complaint alleges facts that, if proven, would bind the insurer to indemnify the insured. See Nichols v. American Employers Ins. Co., 140 Wis.2d 743, 749, 412 N.W.2d 547, 550 (Ct.App.1987). The duty to defend is a contractual obligation of the insurer in line with the insured's reasonable expectation of protection. See 14 Couch on Insurance 2d sec. 51:35 (1982).
Nylund contends that Rural Mutual's duty to defend arose at the time Barber's complaint alleged facts demonstrating coverage under the policy. Nylund reasons that because Rural Mutual refused to defend him, it breached its obligation to defend and should be denied the opportunity to challenge coverage. Nylund relies on our language in Professional Office Bldgs. where we stated: Id. at 586, 427 N.W.2d at 432. In response, Rural Mutual cites Mowry v. Badger State Mut. Cas. Co., 129 Wis.2d 496, 529, 385 N.W.2d 171, 186 (1986), as support for its contention that it had not waived its right to a determination on coverage. In Mowry, the supreme court suggested that the insurer try the coverage issue prior to a trial on the claim for liability and damages. Otherwise, it will have to provide a free defense to its insured. Id.
In Professional Office Bldgs., we noted that the insurer could have tried the coverage issue prior to undertaking the liability defense, but it did not. We stated that " 'when [a] separate trial on coverage does not precede the trial on liability and damages[,]' the insurer 'may need to provide a defense'--sometimes to the extent of 'be[ing] required to furnish a free defense to its insured [--] prior to the determination of coverage.' " Id. at 585, 427 N.W.2d at 431 (citing Mowry, 129 Wis.2d at 528-29, 385 N.W.2d at 186) (emphasis added).
We concluded, therefore, that when the insurer refused to defend the insured at the trial on the liability claim, it waived any later challenge to coverage. We stated:
[N]o Wisconsin court has considered whether an insurer, who has breached its duty to defend an insured, may be estopped from later challenging coverage.
We believe such a rule is not only consistent with, but required by, Wisconsin cases such as Grieb (where the court stated that "the insurer who declines to defend does so at [its] peril" ... We note, too, that courts in other states have, like the American Motorists court, held that an improper refusal to defend waives any later challenge to coverage.
Professional Office Bldgs., 145 Wis.2d at 584-85, 427 N.W.2d at 431 () (emphasis added). It must be emphasized that in Professional Office Bldgs., we discussed the use of waiver of an insurer's right to contest coverage to remedy "an improper refusal to defend" on the liability issue when the coverage issue was later raised.
To apply the same remedy where a trial court has followed the supreme court's recommended bifurcation procedure of first conducting a trial on the coverage issue undermines the public policy goals stressed in Professional Office Bldgs. The facts in...
To continue reading
Request your trial
-
Choinsky v. Emp'rs Ins. Co. of Wausau
...protects insureds against concurrently paying for both a liability defense as well as coverage attorney fees. Barber v. Nylund, 158 Wis. 2d 192, 461 N.W.2d 809 (Ct. App. 1990). Indeed, staying liability after granting bifurcation is generally the best practice. See Reid, 245 Wis. 2d 658, ¶2......
-
Olson v. Farrar
...granted because there was no evidence suggesting that the property damage occurred within the policy period); Barber v. Nylund, 158 Wis.2d 192, 461 N.W.2d 809 (Ct.App.1990) (discussing the circuit court's grant of summary judgment during the coverage phase because the facts showed that the ......
-
Grube v. Daun
...the defense are contractual obligations "in line with the insured's reasonable expectation of protection." Barber v. Nylund, 158 Wis.2d 192, 196, 461 N.W.2d 809, 811 (Ct.App.1990). Refusing to defend is a breach of the insurer's obligation under the contract. As a result, the insured is not......
-
Curtis-Universal, Inc. v. Sheboygan Emergency Medical Services, Inc.
...in even if the complaint charges the insured only with fraud or intentional infliction of emotional distress. Barber v. Nylund, 158 Wis.2d 192, 461 N.W.2d 809, 811 (App.1990); Berg v. Fall, 138 Wis.2d 115, 405 N.W.2d 701, 704 (App.1987). Nor is the insurer allowed to escape from his duties ......