Cardinal v. Leader Nat. Ins. Co., 89-1271

• Decision Date: 13 February 1992
• Docket Number: No. 89-1271,89-1271
• Citation: 480 N.W.2d 1,166 Wis.2d 375
• Parties: Karen J. CARDINAL, Plaintiff, v. LEADER NATIONAL INSURANCE COMPANY, Defendant-Appellant, American & Foreign Insurance Co. a/k/a Royal Insurance Co. of America, Defendant-Respondent-Petitioner, Julia A. Post, Alphonse Post, Paul A. Wilson and Milwaukee Mutual Insurance Co., Defendants.
• Court: Wisconsin Supreme Court

Page 1

480 N.W.2d 1

166 Wis.2d 375

Karen J. CARDINAL, Plaintiff, v. LEADER NATIONAL INSURANCE COMPANY, Defendant-Appellant American & Foreign Insurance Co. a/k/a Royal Insurance Co of America, Defendant-Respondent-Petitioner Julia A. Post, Alphonse Post, Paul A. Wilson and Milwaukee Mutual Insurance Co., Defendants.

No. 89-1271.

Supreme Court of Wisconsin.

Argued Oct. 3, 1991.

Decided Feb. 13, 1992.

For the defendant-respondent-petitioner there were briefs by John J. Albert and Albert, Jude, Shuman & Simanek, S.C., Racine and oral argument by John J. Albert.

For the defendant-appellant there was a brief by Philip C. Reid and Cook & Franke, S.C., Milwaukee and oral argument by Philip C. Reid.

DAY, Justice.

This is a review of a published decision of the court of appeals ¹ reversing a judgment of the Circuit Court for Racine County, Honorable Emmanuel Vuvunas, judge, which held that a "non-owner" motor vehicle insurance policy covered "permissive drivers" of the insured's vehicles. We affirm the court of appeals.

There are four issues in this case. First, whether Paul Wilson's insurance policy insured Paul Wilson's vehicles and therefore Julia Post under the policy's permissive user section. We hold it does not. Second, whether the financial responsibility statutes, sec. 344.24 et seq., Stats., 1989-90, mandate that insurance provided under the statutes insure the vehicles owned by the named insured. We hold it does not. Third, whether the SR-22 form, which certified Paul Wilson's compliance with the financial responsibility statutes, expanded the coverage of Paul Wilson's policy to insure vehicles he owned. We hold it does not. Fourth, whether the omnibus statutes, sec. 632.32 et seq., Stats., 1989-90, which mandate that vehicle insurance cover permissive users of insured vehicles, create liability coverage for Julia Post. We hold it does not.

On March 30, 1986, Karen Cardinal (Cardinal) was involved in an automobile accident and sustained serious injuries. The automobile she was driving was struck by a van driven by Julia Post (Post) who allegedly drove through a stop sign. Paul Wilson (Wilson), the owner of the van, gave Post permission to drive the van. Prior to the accident, in February, 1985, Leader National Insurance Company issued a "non-owner" automobile insurance policy to Paul Wilson. Such policy was in effect at the time of the accident.

Cardinal filed personal injury claims against Milwaukee Mutual Insurance Company (Milwaukee Mutual), Post's insurer; American & Foreign Insurance Company a/k/a Royal Insurance Company (Royal), Cardinal's uninsured-underinsured insurer; and Leader National Insurance Company (Leader), Wilson's insurer. Cardinal's claim against Milwaukee Mutual was severed from her other claims and tried separately. Cardinal's claim against Royal was settled and Cardinal was dismissed from the lawsuit. By subrogation and assignment, Royal replaces Cardinal and pursues the claim against Leader. Royal and Leader are the only parties before this court.

In Wisconsin, drivers whose licenses have been revoked because of their poor driving records are required to show proof of financial responsibility to have their operators licenses reinstated under sec. 344.24 et seq., Stats., 1989-90, the financial responsibility statutes. This requirement can be fulfilled by obtaining liability insurance with the coverage specified in sec. 344.33, Stats., 1989-90 ², and by certifying such coverage under sec. 344.31, Stats., 1989-90. ³

To comply with the financial responsibility statutes, Wilson applied for and purchased automobile liability insurance from Leader. Leader certified that Wilson was financially responsible by completing and filing an SR-22 form with the Department of Transportation.

The first issue is, did Paul Wilson's insurance policy insure the vehicles Wilson owned and therefore Julia Post under the policy's permissive user section? Royal argues the policy is ambiguous and should be construed to cover Julia Post. The construction of an insurance contract is a question of law which we review de novo. Kaun v. Industrial Fire & Cas. 148 Wis.2d 662, 667, 436 N.W.2d 321 (1989). Ambiguities in an insurance contract should be construed in favor of coverage. Smith v. Atlantic Mut. Ins. Co., 155 Wis.2d 808, 811, 456 N.W.2d 597 (1990); D'Angelo v. Cornell Paperboard Products Co., 59 Wis.2d 46, 49, 207 N.W.2d 846 (1973); Kopp v. Home Mut. Ins. Co., 6 Wis.2d 53, 57, 94 N.W.2d 224 (1959). Exclusions are to be narrowly construed against the insurer, especially if they are uncertain as to effect. Smith, 155 Wis.2d at 811, 456 N.W.2d 597; Meiser v. Aetna Casualty & Surety Co., 8 Wis.2d 233, 238, 98 N.W.2d 919 (1959).

The financial responsibility statutes provide what constitutes the insurance policy:

The policy, the written application therefor, if any, and any rider or endorsement which does not conflict with the provisions of this chapter constitutes the entire contract between the parties.

Section 344.33(5)(d), Stats., 1989-90.

On the application form used by Leader, spaces were provided for the description of owned vehicles. No vehicles were described, rather, lines were drawn through the spaces. The Leader policy also contained a declarations page which provided spaces for the description of vehicles. Again, no vehicles were described.

The policy's "Cars We Insure" section states that the policy only insures cars "described on the declarations page." ⁴ The "Protection For Others" section states that permissive users are insured only when using cars "described on the declarations page." ⁵

The Leader insurance policy is not ambiguous. "An ambiguity exists when the policy is reasonably susceptible to more than one construction from the viewpoint of a reasonable person of ordinary intelligence in the position of the insured." Schroeder v. Blue Cross & Blue Shield, 153 Wis.2d 165, 174, 450 N.W.2d 470 (Ct.App.1989); Cieslewicz v. Mut. Service Cas. Ins. Co., 84 Wis.2d 91, 97-98, 267 N.W.2d 595 (1978). Given the clear language of the policy, a reasonable person could only interpret the policy in one way, as insuring only those vehicles described on the declarations page. Since no vehicles were described on either the application or the declarations page, a reasonable person would believe that no vehicles were insured.

This conclusion is bolstered by the equally unambiguous policy endorsement. The endorsement is a one page attachment to the policy clearly stating the policy is a "non-owner" policy insuring "you and your spouse" but not "any automobile owned by you...." ⁶

Taken together, the lack of vehicles described on the application or the declarations page and the unambiguous language of the endorsement clearly reveal that the policy does not insure vehicles. Therefore, Julia Post is not covered as a permissive user since that section applies only where the permissive user operates a vehicle described within the policy.

In addition, the "Financial Responsibility Laws" section of the policy does not create coverage for Julia Post. The relevant portion states: "When we certify this policy as proof [of financial responsibility], all the terms and conditions of this insurance will be amended to comply with the requirements of such law." Since we hold that the financial responsibility statutes mandate that persons, not their vehicles, are insured, the policy, which clearly insures Paul Wilson, not his vehicles, complies with the statute. Therefore, no policy amendment is necessary. ⁷

Thus, under the terms of the policy, Paul Wilson was insured while operating any vehicle, regardless of whether he owns the vehicle. The vehicle itself is not insured. While Julia Post was a permissive driver of Paul Wilson's van, such van was not an insured vehicle, and therefore Julia Post was not insured. ⁸

The second issue is, do the financial responsibility statutes mandate that insurance provided thereunder insure the vehicles owned by the named insured? Royal argues that the financial responsibility statutes require an insured, who owns vehicles, to have vehicle insurance before operating privileges will be reinstated. Statutory interpretation is a question of law which this court reviews de novo. This court does not defer to the determination of either the court of appeals or the circuit court. City of Madison v. Donohoo, 118 Wis.2d 646, 651, 348 N.W.2d 170 (1984).

Prior to its amendment in 1973, the financial responsibility statutes distinguished between "owner's" and "operator's" policies when defining "motor vehicle policy." ⁹ In addition, the certification provision of the pre-1973 statute stated:

Proof of financial responsibility for the future may be furnished by filing with the administrator the written certificate of any insurance carrier.... Such certificate ... shall designate by explicit description or by appropriate reference all motor vehicles covered thereby, unless the policy is issued to a person who is not the owner of a motor vehicle.

Section 344.31, Stats., 1971-72 (emphasis added).

The intent of the pre-1973 financial responsibility statutes clearly was to require a person subject to the financial responsibility statutes to insure the vehicles he or she owned. See Van Erem v. Dairyland Mut. Ins. Co., 5 Wis.2d 450, 556-57, 93 N.W.2d 511 (1958).

However, the amended statutes abandon the distinction between an "owner's policy" and an "operator's policy," and delete the language requiring vehicle insurance for owned vehicles. In so doing, the amended statute creates an ambiguity. "Ambiguity can be created by the interaction of two separate, but related statutes." Van Cleve v. Hemminger, 141 Wis.2d 543, 547-48, 415 N.W.2d 571 (Ct.App.1987).

The amended certification statute suggests it is the vehicle, not the person, which must be covered:

Proof of financial responsibility for the future may be furnished by filing with the secretary the written certification of...