Burgraff v. Menard, Inc.

• Decision Date: 29 July 2014
• Docket Number: No. 2013AP907.,2013AP907.
• Citation: 853 N.W.2d 574,356 Wis.2d 282
• Parties: Kenneth C. BURGRAFF, Sr. and Linda Burgraff, Plaintiffs–Respondents, v. MENARD, INC., Defendant–Appellant, Millers First Insurance Company, Defendant–Respondent, Walmart Stores, Inc. Associates Health and Welfare Plan, Defendant.
• Court: Wisconsin Court of Appeals

356 Wis.2d 282

853 N.W.2d 574

Kenneth C. BURGRAFF, Sr. and Linda Burgraff, Plaintiffs–Respondents

v. MENARD, INC., Defendant–Appellant^†Millers First Insurance Company, Defendant–Respondent^††Walmart Stores, Inc. Associates Health and Welfare Plan, Defendant.

No. 2013AP907.

Court of Appeals of Wisconsin.

Oral Argument Jan. 21, 2014.

Opinion Filed July 29, 2014.

On behalf of the defendant-appellant, the cause was submitted on the briefs of and oral argument by Jeffrey S. Fertl and Melissa J. Lauritch of Hinshaw & Culbertson LLP of Milwaukee.

On behalf of the defendant-respondent, the cause was submitted on the brief of and oral argument by John C. Possi of Mueller, Goss & Possi, S.C. of Milwaukee.

On behalf of the plaintiffs-respondents, the cause was submitted on the brief of Martha H. Heidt of Bye, Goff & Rohde, Ltd. of River Falls.

Before HOOVER, P.J., MANGERSON and STARK, JJ.

Opinion

STARK, J.

¶ 1 Kenneth Burgraff was injured while an employee of Menard, Inc., was loading materials onto Burgraff's trailer using a forklift. Burgraff sued Menard for damages. Menard tendered defense of Burgraff's claim to Burgraff's car insurer, Millers First Insurance Company, asserting it was entitled to coverage under the Millers First policy as a permissive user of Burgraff's vehicle. In addition to the Millers First policy, Menard had a commercial general liability policy issued by CNA, which included a $500,000 self-insured retention.

¶ 2 Menard raises two issues on appeal. First, Menard argues the circuit court erred by applying the “other insurance” clause from the Millers First policy. Pursuant to that clause, the court determined Menard and Millers First would share responsibility for paying any settlement or verdict Burgraff obtained pro rata. Menard contends the court should have instead treated Menard's self-insured retention as excess coverage, pursuant to the “other insurance” clause in the CNA policy. We conclude the circuit court properly applied the “other insurance” clause from the Millers First policy, and we affirm on this issue.

¶ 3 Second, Menard argues the circuit court erred by determining Millers First no longer had a duty to defend Menard after Millers First settled its proportionate share of Burgraff's claim. We agree with Menard that the settlement did not extinguish Millers First's duty to defend. The Millers First policy unambiguously states the duty to defend continues until Millers First has “exhausted” its “limit of liability.” Because Millers First settled for less than its policy limit, it did not exhaust its limit of liability. We therefore reverse the circuit court's decision that Millers First had no further duty to defend Menard after it settled its share of Burgraff's claim. We further conclude Millers First breached its duty to defend when it withdrew its defense of Menard following the settlement. We remand to the circuit court for a determination of Menard's damages.

BACKGROUND

¶ 4 At the time of the accident, Burgraff's vehicle and trailer were insured under a car insurance policy issued by Millers First. The Millers First policy had a $100,000 per person liability limit. The policy's insuring agreement states:

We will pay damages for “bodily injury” or “property damage” for which any “insured” becomes legally responsible because of an auto accident. Damages include pre-judgment interest awarded against the “insured.” We will settle or defend, as we consider appropriate, any claim or suit asking for these damages. In addition to our limit of liability, we will pay all defense costs we incur. Our duty to settle or defend ends when our limit of liability for this coverage has been exhausted. We are not obligated to provide defense after we have paid our limits of liability in settlement of claims or suits. We have no duty to defend any suit or settle any claim for “bodily injury” or “property damage” not covered under this policy.

The policy also contains the following “other insurance” clause:

If there is other applicable liability insurance, we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits. However, any insurance we provide for a vehicle you do not own shall be excess over any other collectible insurance.

¶ 5 Menard tendered defense of Burgraff's claims to Millers First, asserting it was entitled to coverage under the Millers First policy because its employee was a permissive user of Burgraff's vehicle. See Blasing v. Zurich Am. Ins. Co., 2014 WI 73, 356 Wis.2d 63, 850 N.W.2d 138. Millers First agreed to provide a defense for Menard, subject to a reservation of rights. Millers First subsequently conceded Menard was entitled to coverage under Burgraff's policy.

¶ 6 In addition to the Millers First policy, Menard was insured at the time of the accident under a commercial general liability policy issued by CNA. The CNA policy had a liability limit of $500,000 per occurrence. The policy contains an “other insurance” clause, which provides, in relevant part:

4. Other Insurance

If other valid and collectible insurance is available to the insured for a loss we cover under Coverages A or B of this Coverage Part, our obligations are limited as follows:

a. Primary Insurance

This insurance is primary except when Paragraph b. below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary.

Then, we will share with all that other insurance by the method described in Paragraph c. below.

b. Excess Insurance

(1) This insurance is excess over:

(a) Any of the other insurance, whether primary, excess, contingent or on any other basis:

....

(iv) If the loss arises out of the maintenance or use of aircraft, “autos” or watercraft ...

....

(3) When this insurance is excess over other insurance, we will pay only our share of the amount of the loss, if any, that exceeds the sum of:

(a) The total amount that all such other insurance would pay for the loss in the absence of this insurance; and

(b) The total of all deductible and self-insured amounts under all that other insurance.

....

c. Method of Sharing

If all of the other insurance permits contribution by equal shares, we will follow this method also. Under this approach each insurer contributes equal amounts until it has paid its applicable limit of insurance or none of the loss remains, whichever comes first.

If any of the other insurance does not permit contribution by equal shares, we will contribute by limits. Under this method, each insurer's share is based on the ratio of its applicable limit of insurance to the total applicable limits of insurance of all insurers.

¶ 7 The CNA policy also includes a self-insured retention endorsement, which states, “In consideration of the premium charged, it is agreed that the limits of insurance for each of the coverages provided by this policy ... will apply excess of a self-insured retention (hereinafter referred to as the Retention Amount)[.]” The “retention amount” is $500,000 per occurrence. Under the self-insured retention endorsement, Menard is required to pay the first $500,000 worth of damages and defense costs arising from an occurrence before CNA's duties to defend and indemnify Menard take effect.

¶ 8 Millers First moved for partial summary judgment, arguing Menard's $500,000 self-insured retention qualified as “other applicable liability insurance” under the Millers First policy's “other insurance” clause. As a result, Millers First asked the circuit court to apply the “other insurance” clause and declare that Millers First's share of any verdict or settlement would be one-sixth—that is, the proportion that Millers First's liability limit ($100,000) bore to the total of all applicable limits ($600,000—comprised of Millers First's $100,000 limit plus Menard's $500,000 self-insured retention).¹ In response, Menard argued its self-insured retention should be treated as excess coverage, pursuant to the “other insurance” clause in the CNA policy. The circuit court agreed with Millers First and granted it partial summary judgment. The court held Menard would be “liable for five-sixths of any verdict or settlement and [Millers First would be liable] for one-sixth of any verdict or settlement.”²

¶ 9 Millers First and Burgraff then settled Millers First's one-sixth portion of Burgraff's claim. Under the settlement agreement, Millers First paid Burgraff $40,000, and, in exchange, Burgraff agreed to “fully discharge Millers First Insurance Company and one-sixth of any liability that Menard, Inc. may have to [Burgraff].” Menard did not reach any settlement with Burgraff regarding the remaining five-sixths of its liability.

¶ 10 Millers First subsequently moved for summary judgment, arguing it no longer had a duty to defend Menard because it had fully satisfied its duty to pay one-sixth of any verdict or settlement.³ The circuit court granted Millers First's motion, reasoning it did not “make any sense” to require Millers First to continue defending Menard when Millers First no longer had a duty to indemnify Menard. Menard now appeals.

DISCUSSION

¶ 11 We review a circuit court's decision to grant summary judgment independently, using the same standard applied by the circuit court. Stubbe v. Guidant Mut. Ins. Co., 2002 WI App 203, ¶ 6, 257 Wis.2d 401, 651 N.W.2d 318. Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Wis. Stat. § 802.08(2).

¶ 12 Here, the facts are undisputed, leaving only issues of law for our review. Interpretation of an insurance policy is a question of law that we review independently. Stubbe, 257 Wis.2d 401, ¶ 7, 651 N.W.2d 318. We construe policy language from the perspective of a reasonable insured, giving the words used in the policy their common and ordinary meanings. Id., ¶ 8. If policy language is unambiguous, we simply apply it as written. Id. However, if policy language is...