Brown County v. Ohic Ins. Co., 2006AP1063.

• Decision Date: 27 February 2007
• Docket Number: No. 2006AP1063.,2006AP1063.
• Citation: 730 N.W.2d 446,2007 WI App 46
• Parties: BROWN COUNTY, d/b/a Brown County Mental Health Center, Plaintiff-Appellant-Cross-Respondent, v. OHIC INSURANCE COMPANY, Defendant-Respondent-Cross-Appellant.
• Court: Wisconsin Court of Appeals

730 N.W.2d 446

2007 WI App 46

BROWN COUNTY, d/b/a Brown County Mental Health Center, Plaintiff-Appellant-Cross-Respondent, v. OHIC INSURANCE COMPANY, Defendant-Respondent-Cross-Appellant.

No. 2006AP1063.

Court of Appeals of Wisconsin.

Submitted on Briefs February 5, 2007.

Opinion Filed February 27, 2007.

On behalf of the plaintiff-appellant-cross-respondent, the cause was submitted on the briefs of George Burnett of Liebmann, Conway, Olejniczak & Jerry, Green Bay.

On behalf of the defendant-respondent-cross-appellant, the cause was submitted on the brief of David J. Pliner of Corneille Law Group, L.L.C., Madison.

Before CANE, C.J., HOOVER, P.J., and PETERSON, J.

¶ 1 PETERSON, J

This is a coverage dispute between Brown County and one of its insurers, OHIC Insurance. Brown County was sued several years ago when a patient died at a county facility. The County's liability was covered by two insurance policies: one with Wisconsin Municipal Mutual Insurance Company (WMMIC) and another with OHIC Insurance. Both policies provided primary coverage. The WMMIC policy required the County to pay the first $100,000 as a "self-insured retention." The OHIC policy provided full coverage. The two insurance companies settled the suit. As part of WMMIC's contribution, the County paid the first $100,000. In this action the County seeks to recoup from OHIC its $100,000 payment to WMMIC.

¶ 2 The OHIC policy contains an "other insurance" clause. The circuit court concluded that, under the clause, OHIC did not cover reimbursement for other insurance. The question, however, was whether the $100,000 self-insured retention was other insurance. The circuit court concluded it was and granted OHIC summary judgment. We disagree and reverse the judgment.¹

FACTS

¶ 3 This case arises out of a previous suit against the County precipitated by the death of Tiffany Rohr, a developmentally disabled young woman. Rohr died on November 13, 2000 as a result of injuries she sustained while attempting to escape from Bayview Developmental Center.

¶ 4 At the time, the County had two insurance policies in effect. The first, issued by WMMIC, covered the County's general liability, excluding medical professional liability. The policy had a $5 million limit of liability and a "self-insured retention" of $100,000. The policy covered damages only after the self-insured retention was exhausted. This meant the County was liable for the first $100,000 of any covered loss, after which WMMIC would cover the next $5 million of the loss.

¶ 5 The second policy was a hospital professional liability and general liability insurance policy issued by OHIC to Brown County, d/b/a Brown County Mental Health Center.² The OHIC policy had a limit of $1 million per "medical incident," a $1 million bodily injury limit for each occurrence, and no deductible or self-insured retention.

¶ 6 Because of the nature of the claims against the County, both the WMMIC and the OHIC policies provided coverage.³ In the course of the Rohr litigation, the County paid $100,000 to WMMIC to satisfy its self-insured retention. WMMIC and OHIC then settled the litigation, with both contributing to the settlement.

¶ 7 After the conclusion of the Rohr litigation, the County filed this suit against OHIC to recoup its $100,000 payment to WMMIC. In its motion for summary judgment, the County argued it was entitled to the $100,000 because the OHIC policy covered Rohr's claim in full, without any deductible, and OHIC was therefore required to reimburse the County for its payment toward the first $100,000 of Rohr's claim. OHIC responded that the County's self-insured retention was in fact a form of insurance, not a deductible. Relying on its other insurance clause, OHIC argued the County had no right to reimbursement of funds the County paid out as its own insurer.

¶ 8 The circuit court concluded that "other insurance" included the County's self-insured retention agreement with WMMIC. The court then interpreted the OHIC "other insurance" clause to mean that OHIC provided coverage only after the County paid the first $100,000 of Rohr's claim. The court therefore granted summary judgment to OHIC.

STANDARD OF REVIEW

¶ 9 The meaning of an insurance contract is a question of law, reviewed without deference to the circuit court Gresens v. State Farm Mut. Auto. Ins. Co., 2006 WI App 233, ¶ 6, ___ Wis.2d ___, 724 N.W.2d 426. Similarly, whether summary judgment is appropriate is a question of law reviewed without deference to the circuit court. Green Spring Farms v. Kersten, 136 Wis.2d 304, 314-15, 401 N.W.2d 816 (1987).

DISCUSSION

¶ 10 The result in this case hinges on whether the County's self-insured retention agreement with WMMIC was "other insurance" for purposes of the OHIC other insurance clause.⁴ OHIC concedes that if the County's agreement with WMMIC was not "other insurance," it is liable for the first $100,000 of Rohr's claim. We conclude the OHIC policy is ambiguous as to whether the County's agreement with WMMIC was "other insurance," and therefore construe the OHIC policy as providing coverage.⁵

¶ 11 Insurance policies are interpreted as they would be by a reasonable person in the position of the insured. State Farm Mut. Auto. Ins. Co. v. Gillette, 2002 WI 31, ¶ 28, 251 Wis.2d 561, 641 N.W.2d 662. If the reasonable insured could read the policy as having more than one meaning, the policy is construed against the insurer and in favor of coverage. Id. Exclusions from coverage are construed narrowly. First American Title Ins. Co. v. Dahlmann, 2006 WI 65, ¶ 41, 291 Wis.2d 156, 715 N.W.2d 609.

¶ 12 "Other insurance" is not defined in the OHIC policy. We therefore begin with the dictionary. See Everson v. Lorenz, 2005 WI 51, ¶ 15, 280 Wis.2d 1, 695 N.W.2d 298. As applicable here, "insurance" is defined in WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 1173 (unabr.1993), as "coverage by contract whereby for a stipulated consideration one party undertakes to indemnify or guarantee another against loss by a specified contingency or peril."

¶ 13 One meaning of insurance is the one urged by OHIC and adopted by the circuit court: that self-insurance is "just a form of insurance ... the modifying term `self' just indicates where it emanates...." Hillegass v. Landwehr, 176 Wis.2d 76, 82, 499 N.W.2d 652 (1993). Put another way, although no premiums are actually exchanged, the essence of self-insurance is the same as third party insurance: "exchanging future liability for premium payments." Id.

¶ 14 The County, however, argues another interpretation is reasonable. The County argues that from an insured's perspective, a self-insured retention is in fact no insurance at all, or insurance with a very large deductible. See Sybron Transition Corp. v. Security Ins. of Hartford, 258 F.3d 595, 598 (7th Cir.2001) (self-insurance is best described as "insurance with a big deductible."). The County argues that it could reasonably interpret the term "insurance" in OHIC's policy as referring only to situations where "one party undertakes to indemnify or guarantee another against loss." WEBSTER'S, supra, at 1173. In other words, the County argues "insurance" could refer only to agreements where third parties agreed to insure the County against risk, not agreements whereby the County agreed to pay its losses itself.

¶ 15 We agree with the County. We are required to view this language from the position of a reasonable insured in the place of the County. Gillette, 251 Wis.2d 561, ¶ 28, 641 N.W.2d 662. From the County's perspective, the only question that matters is who is liable: the County or someone else. The County's policy with WMMIC characterized the County's obligation as self-insurance, but from the County's perspective the policy could just as well have stated there was "no coverage" for the first $100,000 of a given claim.

¶ 16 A contrary result would in effect allow OHIC to graft WMMIC's policy language into its other insurance clause. That is, even though the County's arrangement with WMMIC operated in exactly the same way as a deductible, OHIC is asking this court to find WMMIC's use of the term "insurance" to describe the $100,000 dispositive. We decline to do so. OHIC had the opportunity to define "other insurance" to include payments made by its own policyholder. It failed to do so.

¶ 17 We therefore conclude a reasonable insured in the County's position could believe that its agreement with WMMIC was not "other insurance" for purposes of the OHIC policy. Because the OHIC clause is ambiguous on this point, we construe it to provide coverage. Gillette, 251 Wis.2d 561, ¶ 28, 641 N.W.2d 662.

¶ 18 The circuit court relied on Hillegass, 176 Wis.2d at 78, 499 N.W.2d 652, as does OHIC. However, Hillegass was a dispute between a self-insured party and an unaffiliated insurer, not a dispute between a self-insured party and its own insurer. All of the stated reasons for the court's conclusion in Hillegass were specific to a dispute between a self-insured party and an unaffiliated third party. Those reasons favor the opposite conclusion here.

¶ 19 Hillegass was a dispute over the defendants' insurance coverage in an automobile accident involving a vehicle owned by Burlington Air Express. Id. at 78, 499 N.W.2d 652. Burlington self-insured its vehicles for the first $1 million in damages, with an additional $2 million umbrella policy with Protective Insurance Company for damages above $1 million. Id. The dispute was between Burlington and Farmers Insurance Exchange, a second insurer who had issued personal automobile insurance policy to the driver of the vehicle. Id.

¶ 20 The Farmers policy provided that in the case of an accident involving a vehicle not owned by its policyholder, the Farmers policy "shall be excess over any other collectible insurance." Id. The question before the court was whether Burlington's $1 million self-insurance was "other collectible insurance" as defined in the Farmers policy,...