Bugni v. Employers Ins. of Wausau
| Citation | 136 Wis.2d 556,402 N.W.2d 389 |
| Parties | NOTICE: UNPUBLISHED OPINION. RULE 809.23(3), RULES OF CIVIL PROCEDURE, PROVIDE THAT UNPUBLISHED OPINIONS ARE OF NO PRECEDENTIAL VALUE AND MAY NOT BE CITED EXCEPT IN LIMITED INSTANCES. DONALD M. BUGNI, Plaintiff-Respondent and Cross-Appellant, v. EMPLOYERS INSURANCE OF WAUSAU, Defendant-Respondent, INTERNATIONAL SURPLUS LINES INSURANCE COMPANY, Defendant-Appellant and Cross-Respondent. 85-2327. |
| Decision Date | 27 January 1987 |
| Court | Court of Appeals of Wisconsin |
Circuit Court, Price County
Affirmed in part, reversed in part, and cause remanded with directions
Appeal and Cross-Appeal from a judgment of the circuit court for Price county: Douglas T. Fox, Judge.
Before CANE, P.J., LaROCQUE and MYSE, JJ.
International Surplus Lines Insurance Company (ISLIC) appeals a summary judgment declaring it the sole indemnitor of the Iron County Sheriff, Donald Bugni, for the legal costs of his defense in a federal lawsuit and further declaring that an Employers Insurance of Wausau policy was inapplicable to the same claim. Bugni's legal expenses arose out of a lawsuit by a former Iron County deputy sheriff, Ronald Morzenti, whom Bugni and the county had discharged. ISLIC claims that the trial court erroneously interpreted both insurance policies and, in the alternative, that we should remand because there are disputed facts as to the extent of its liability for Bugni's fees. Bugni cross-appeals the denial of prejudgment interest at 12% under sec. 628.46(1), Stats. We affirm the policy interpretations but reverse the denial of prejudgment interest.
All parties moved for summary judgment. This was the equivalent of a stipulation of facts, permitting the trial court to decide the case on the legal issues. streiff v. American Family Mutual Insurance Co., 114 Wis.2d 63, 64-65, 337 N.W.2d 186, 187 (Ct. App. 1983), rev'd on other grounds, 118 Wis.2d 602, 348 N.W.2d 505 (1984). When reviewing the trial court's decision on a motion for summary judgment, we apply the same analysis as the trial court. Driver v. Driver, 119 Wis.2d 65, 69, 349 N.W.2d 97, 100 (Ct. App. 1984).
Morzenti sued both Iron County and its newly-elected sheriff, Bugni, in federal court claiming that he was 'discharged . . . without . . . notice . . . [and] hearing . . . all in violation of due process . . . and [Morzenti's] employment contract . . ..' Morzenti also sued the sheriff separately for 'conspiracy to withhold office' and for punitive damages. Morzenti had served as an Iron County deputy sheriff for a number of years, was eventually named chief deputy, and claimed civil service status. When Bugni assumed office as the sheriff in January of 1983, he refused to redeputize Morzenti and terminated his employment. The Iron County Law Enforcement Commission, in response to Bugni's decision, first suspended Morzenti pending an opinion from the district attorney on Morzenti's status. The county terminated his employment several weeks later.
A special verdict by a federal jury found that Morzenti did 'have a legitimate expectation of continued employment as the Chief Deputy Sheriff, . . . terminable only for good cause, based upon his contract with the county.' The jury also found that Bugni acted in good faith toward Morzenti and, in awarding damages, attributed all of Morzenti's losses to the county and none to Bugni. The jury awarded damages against the county as follows:
Past Damages $ 536.31 earnings, benefits, and out-of-docket expenses
----------
$10,000.00 emotional distress
----------
Future Damages $55,000.00 earnings
----------
$22,000.00 benefits
----------
$ 5,000.00 emotional distress
----------
$ 500.00 out-of-pocket expenses
----------
$17,500.00 personal or professional reputation
----------
Employers declined to defend the Morzenti suit and denied liability for indemnification as well. ISLIC reserved its right to deny indemnity and also advised Bugni of his duty under the insurance contract to maintain his own defense.
Whether either insurer has the responsibility to indemnify the sheriff for his attorney fees and costs depends on the provisions of the respective policies at issue. Employers provided duty to defend provisions for those claims covered by its policy. Where the insurer wrongfully compels the insured to conduct his own defense, it is uniformly held that the insured may recover the expenses of litigation, including costs and attorney fees, from the insurer. 7C Appleman, Insurance Law and Practice, sec. 46.91, at 240 (rev. ed. 1979); see Carlson v. Grimsrud, 223 Wis. 561, 565, 270 N.W. 50, 51 (1936). ISLIC included costs of defense within the definition of 'loss,' payable subject to the terms, conditions, and exclusions of its policy. We proceed, therefore, to examine the policies separately in order to apply Morzenti's claim to the terms, conditions, and exclusions of each policy. Before doing so, however, we address a problem with the record.
Ordinarily, the nature of the claim established is easily ascertainable from the record. That task here is complicated by the procedural history of this case. The two insurers were not made parties to the federal action. The jury was not asked to answer any factual insurance coverage questions. The federal verdict form was not couched in terms correlative with either insurance policy.
Both insurers were parties to a declaratory judgment action in Iron County v. Employers Insurance, No. 85-1546, slip op. (Wis. App. Jan. 13, 1987), in which the coverage provisions at issue in this case were considered and resolved. The decision in that case is binding on the merits as between ISLIC and Employers under the doctrine of res judicata. See DePratt v. West Bend Mutual Insurance Co., 113 Wis.2d 306, 334 N.W.2d 883 (1983). Although Bugni was not a party to the declaratory judgment action, the insurers are still bound by that decision, despite the lack of mutuality of parties, under the doctrine of collateral estoppel explained in Crowall v. Heritage Mutual Insurance Co., 118 Wis.2d 120, 346 N.W.2d 327 (Ct. App. 1984).
None of the parties in Iron County sought to present new evidence to the trial court, although the Uniform Declaratory Judgments Act contemplates the determination of factual issues. Section 806.04(9), Stats., provides:
Jury trial. When a proceeding under this section involves the determination of an issue of fact, such issue may be tried and determined in the same manner as issues of fact are tried and determined in other civil actions . . ..
The only record to support the declaratory judgment consisted of Morzenti's complaint, the federal jury instructions, and the verdict. The parties on that appeal tacitly relied upon the assumption that Morzenti proved as a fact in federal court each of the allegations of his complaint necessary to support the jury's verdict. We concluded that this assumption was neither illogical nor unjust, and, while not as desirable as formal findings, we disposed of the indemnification issues using the same assumption. We inferred, however, no facts beyond those essential to support the jury's verdict. Assertions of fact that were not part of the record were not considered. Jenkins v. Sabourin, 104 Wis.2d 309, 313-14, 311 N.W.2d 600, 603 (1981).
In applying Morzenti's claim to the policies, we concluded that Morzenti's complaint, although separated into three 'claims,' stated but one cause of action. A cause of action must be viewed as a grouping of facts falling into a single unit or occurrence as a lay person would view them. Caygill v. Ipsen, 27 Wis.2d 578, 582, 135 N.W.2d 284, 286 (1965). A court is not bound by the form of the pleading to determine whether more than one cause of action is alleged. Antigo Superior Nursing Home v. First Federal Savings & Loan Association, 51 Wis.2d 196, 204, 186 N.W.2d 265, 269 (1971). Although Morzenti complained of and was compensated for various injuries, it is the wrongful act and not the injury that creates liability. Caygill, 27 Wis.2d at 582, 135 N.W.2d at 286. Morzenti's cause of action was for wrongful discharge arising out of a 42 U.S.C. sec. 1983 violation.
Each of the several Employers' policy provisions upon which ISLIC relies contained duty to defend provisions. We concur with the trial court that Employers had no duty to defend the suit because it did not insure against the claims made by Morzenti.
The duty to defend is undoubtedly broader than the duty to pay. Gross v. Lloyds of London Insurance Co., 121 Wis.2d 78, 86, 358 N.W.2d 266, 270 (1984). The duty to defend arises if the complaint alleges facts that, if proven, would give rise to liability covered under the terms and conditions of the policy. Doubts about coverage must be resolved by the insurer in favor of the insured. Sola Basic Industries, Inc. v. United States Fidelity & Guaranty Co., 90 Wis.2d 641, 646-47, 280 N.W.2d 211, 213-14 (1979).
ISLIC first claims that Employers provided coverage under the Employee Benefits Endorsement, which reads:
The Company will pay . . . all sums . . . arising out of any act, error or omission occurring in the administration of the . . . employee benefits program . . ..
. . . .
Additional definition. . . . 'administration' means . . . 'effecting the . . . termination . . . of employees under the . . . employee benefits program.' [Emphasis supplied.]
When used in a liability insurance policy, the words 'arising out of' are very broad, general, and comprehensive, and should generally be accorded a reasonably liberal construction. Tomlin v. State Farm Automobile Insurance Co., 95 Wis.2d 215, 224-25, 290 N.W.2d 285, 290 (1980). This does not mean, however, that the clause...
To continue reading
Request your trial