Davison v. Wilson

Decision Date02 March 1976
Docket NumberNo. 66,66
Citation239 N.W.2d 38,71 Wis.2d 630
PartiesJimmie G. DAVISON, Plaintiff-Respondent, v. Talmadge E. WILSON et al., Defendants, Dairyland Insurance Company, Appellant. (1974).
CourtWisconsin Supreme Court

Cook & Franke, S.C., Milwaukee, for appellant; (Francis R. Croak and Robert F. Johnson,) Milwaukee.

Alexander N. Rubin, Milwaukee, for plaintiff-respondent; Harold A. Laufer, Milwaukee, of counsel.


This action arose out of an automobile accident on December 10, 1970. Jimmie G. Davison commenced the action against Talmadge E. Wilson, the driver of the vehicle in which Davison was a passenger. Wilson was the named insured of an automobile liability policy issued by Dairyland Insurance Company. Because Davison, the plaintiff, and Wilson, the named insured driver, were both employees of the Wisconsin State Employment Service and were in the course of their employment, Dairyland Insurance Company declined to extend coverage, because of an exclusion clause in the policy issued to Wilson. By stipulation, the parties agreed to a court trial on coverage only. That trial resulted in a 'judgment,' holding that the exclusion was invalid and coverage was afforded. Appeal was taken following a subsequent judgment on the merits of the case.

We note in passing that the declaration by the court that coverage was afforded ought not to have been denominated a 'judgment.' It was an intermediate order, which affected the merits of the case. Such an order can be reviewed, like other intermediate orders, on an appeal from a judgment on the merits. Sec. 274.34, Stats. Accordingly, the trial-court holding that the exclusion was invalid is reviewed as an intermediate order that affected the final judgment.

We agree with the trial judge's conclusion that the exclusion relied upon in this case was invalid, because the policy format did not comply with sec. 204.34(5), Stats. In addition, we conclude that the exclusion is contrary to statutory coverage provisions and is contrary to public policy. We affirm.

The insurance policy issued to Talmadage E. Wilson obligated Dairyland Insurance Company:

'To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

'Coverage A, bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person, caused by accident and arising out of the ownership, maintenance or use of the automobile.'

However, in the section of the policy captioned, 'Exclusions,' appears the following provision, upon which Dairyland Insurance Company relies:

'This policy does not apply:

'. . .

'Under Coverages A

'. . .

'(h) . . . (2) to any employee with respect to injury to or sickness, disease or death of another employee of the same employer injured in the course of such employment in an accident arising out of the maintenance or use of the automobile in the business of such employer.'

One reason why the trial judge said the exclusion was invalid was because it was 'buried in the obscurity of two paragraphs that deal exclusively with workmen's compensation.'

The trial judge also referred to the requirements of sec. 204.34(5), Stats. That statute provides 'Every policy of insurance, agreement of indemnity or bond referred to in sub. (1) shall afford coverage in respect to liability on account of bodily injury, sickness or disease, including death resulting therefrom, sustained by any person who is a passenger in or on the insured vehicle, or it shall state prominently on its face in contrasting color that such coverage is not afforded.'

Our inspection of a certified copy of the policy shows it to have been printed throughout in green ink on white paper. The portion of the policy upon which Dairyland relies fails to show the exclusion in contrasting color and is in a type style identical to the rest of the policy. We deem that error fatal to the validity of the exclusion. It is apparent that the legislature considered it mandatory and necessary as a matter of public policy that insurers alert prospective purchasers that coverage afforded under the general insuring agreement would not be afforded under some circumstances. These exclusions from coverage cannot be considered valid, because the notice given to the purchaser of the policy was insufficient under the statutes. 1

Although Dairyland argues that sec. 204.34(5), Stats., applies only to a blanket exclusion of passengers in the insured vehicle and does not apply to the exclusion of passengers in specific fact situations as in the instant case, such assertion is not supported by the statute. The legislature did not distinguish between the exclusion of passengers generally and the exclusion in respect to a specific situation. Whenever coverage for liability is denied to a passenger in the insured vehicle, the exclusion or denial of coverage must follow the format prescribed by sec. 204.34(5).

The trial judge was also troubled by the public-policy implications raised by the co-employee exclusion, and so are we. The particular exclusion is included in a section of the policy describing other situations warranting exclusion, and to which workmen's compensation is applicable. Although Exclusion (h)(2) makes no reference to workmen's compensation, the exclusion was perhaps intended to deny coverage only under circumstances where the driver and the passenger are both subject to workmen's compensation from the same employer.

Exclusion (h)(2), however, is not rationally compatible with the other exclusions, (g)(1), (g)(2), and (h)(1), 2 of the same section of the policy. Those exclusions appear to be directed to the situation where the named insured is the employer. However, (h)(2) excludes coverage to any employee, including the named insured, who is involved in an automobile accident causing injury to a co-employee in the course of the employer's business.

In Wisconsin, the fact that an employee may receive workmen's compensation from his employer for injuries sustained in the course of his employer's business does not prevent that employee from bringing an action against his co-employee tort-feasor. See. 102.29, Stats. Under the circumstances of this case, then, Davison may be entitled to workmen's compensation from the State of Wisconsin, and may also sue and recover tort damages from the negligent co-employee Wilson.

What public-policy factors are there that warrant the exclusion of the named insured Wilson from the tort-liability coverage of the policy he purchased? Only one motive is apparent to this court. By excluding coverage in the co-employee situation, the insurance company, to some extent, reduces its risk, and theoretically this should be reflected actuarially in the lowering of insurance premiums or, alternatively, in an increase in the company's rate of return. On the other hand, a miniscule reduction of premium is hardly a benefit to a named insured who is deprived of coverage in a situation to which his insurance would ordinarily apply.

The named insured by this exclusion is made personally liable for the total damages; and, significantly, the benefits of full insurance coverage under the tort action are denied the innocent passenger. The latter result is contrary to the consistent position of this court that the purpose of the omnibus provisions of the statute is to provide coverage to the insured and compensation to victims of automobile accidents. Haines v. Mid-Century Insurance Co. (1970), 47 Wis.2d 442, 447, 177 N.W.2d 328; Krempel v. Noltze (1969), 41 Wis.2d 454, 459, 164 N.W.2d 227; Pavelski v. Roginski (1957), 1 Wis.2d 345, 349, 84 N.W.2d 84. Hence, ambiguities in coverage are to be construed in favor of coverage, while exclusions are narrowly construed against the insurer. Lawver v. Boling, and Cumis Insurance Society, Inc. (1976), 71 Wis.2d 408, 238 N.W.2d 514.

The rationale which purports to justify the exclusion of an employee from coverage when the employer is the named insured under an automobile accident insurance policy is not applicable in this case, for in Wisconsin third-party tort actions can be brought by an injured employee.

In Hunker v. Royal Indemnity Co. (1973), 57 Wis.2d 588, 204 N.W.2d 897, we discussed the policy factors which show some rationality behind those exclusions which protect an employer and the employer's liability insurance company from common-law tort actions brought by injured employees. We said in Hunker, supra, page 608, 204 N.W.2d page 907:

'The rationale that precludes a suit against the employer who gives up his common-law defenses is clear. It is less clear where the tortfeasor co-employee is protected. However, as pointed out in 2 Larson, Workmen's Compensation Law, p. 182 (now renumbered ch. 14, p. 39), sec. 72.20:

". . . The reason for the employer's immunity is the quid pro quo by which the employer gives up his normal defenses and assumes automatic liability, while the employee gives up his right to common-law verdicts. 3 This reasoning can be extended to the tortfeasor co-employee; he, too, is involved in this compromise of rights. Perhaps, so the argument runs, one of the things he is entitled to expect in return for what he has given up is freedom from common-law suits based on industrial accidents in which he is at fault.'

'On the other hand, Larson makes the telling argument against extending immunity to the co-employee:

"If there is no strong reason of compensation policy for destroying common-law rights as to various classes of third parties, then, every presumption should be on the side of preserving those rights, once basic compensation protection has been assured. The fundamental reasons for negligence liability are the same as they always were. The injured plaintiff has a right to be made whole--not just partly whole--and the more inadequate compensation recoveries appear, the more cogent becomes this...

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  • Vidmar v. American Family Mut. Ins. Co.
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    ...coverage are to be construed in favor of coverage, while exclusions are narrowly construed against the insurer. Davison v. Wilson, 71 Wis.2d 630, 635-636, 239 N.W.2d 38 (1976). Words or phrases are ambiguous when they are reasonably susceptible to more than one construction. However, when t......
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