Day v. Allstate Indem. Co.

Decision Date29 April 2011
Docket NumberNo. 2008AP2929.,2008AP2929.
Citation332 Wis.2d 571,798 N.W.2d 199,2011 WI 24
PartiesWendy M. DAY, individually and as Personal Representative of the deceased, Emma Day, Plaintiff–Respondent–Petitioner,v.ALLSTATE INDEMNITY COMPANY, Defendant–Third–Party Plaintiff–Appellant,v.Clinton Day, Third–Party Defendant.
CourtWisconsin Supreme Court


For the plaintiff-respondent-petitioner the cause was argued by Martha H. Heidt, Bye, Goff & Rohde, Ltd., River Falls, with whom on the brief was C.M. Bye and Brian F. Laule.For the defendant-third-party-plaintiff-appellant the cause was argued by John M. Swietlik, Jr., Kasdorf, Lewis & Swietlik, S.C., Milwaukee with whom on the brief was Michael D. Aiken and Michael J. Cerjak.ANN WALSH BRADLEY, J.

Wendy M. Day seeks review of a published decision of the court of appeals reversing the circuit court's denial of Allstate Indemnity Company's motion for summary judgment.1 The parties dispute whether Wendy's claim for wrongful death is covered under the terms of a homeowner's policy Allstate issued to Clinton and Holly Day. Allstate argues that the language of the family exclusion precludes coverage for Wendy's claim because a benefit of coverage would accrue directly or indirectly to an insured person.

¶ 2 The court of appeals concluded that Clinton, who is an insured person, would benefit from the coverage by virtue of his entitlement to half of any recovery Wendy received. It determined that the exclusion applied, and it directed the circuit court to grant summary judgment in favor of Allstate.

¶ 3 We determine that the court of appeals erred when it directed the circuit court to grant summary judgment in favor of Allstate. The court of appeals' assertion that Clinton would have a legal right to collect a portion of the wrongful death award fails to distinguish the right to pursue a claim under the wrongful death statute from the ownership of a wrongful death recovery when the parties are divorced.

¶ 4 Based upon an examination of the language of the policy, the canons of insurance policy construction, and our case law, we conclude that Allstate has failed to meet its burden to demonstrate that the family exclusion unambiguously precludes coverage. Therefore, we reverse the decision of the court of appeals directing the entry of summary judgment and remand to the circuit court for further proceedings.


¶ 5 This insurance coverage dispute arises out of several claims advanced in the wake of the events of November 27, 2006. On that evening, eight-year-old Emma Day drowned while taking a bath at the home of her father, Clinton Day, and her stepmother, Holly Day.

¶ 6 The plaintiff in this action is Emma's mother and Clinton's former wife, Wendy Day. Wendy and Clinton divorced in 2004. They shared joint custody and placement of Emma prior to her death. Emma and her two sisters, Hannah Day and Desirae Sarver, were scheduled to spend the night of November 27 at Clinton and Holly's home.

¶ 7 According to the allegations in the complaint, Emma had epilepsy and suffered from frequent seizures. On the day of her death, she had two seizures and was excused early from school. Holly picked Emma up from school. Later that evening, Holly prepared a bath for Emma. The complaint alleges that Holly left Emma unattended in the bathtub with the bathroom door closed, and that Emma drowned as a result of having a seizure in the bathtub.

¶ 8 Wendy filed suit against Holly, alleging negligence. The complaint named Wendy as a plaintiff in three different capacities: “Individually”; “as Personal Representative of the Deceased”; and “on behalf of her Minor Children,” Desirae and Hannah.

¶ 9 The complaint demanded the pecuniary loss and injury Wendy suffered as a result of Emma's death, an amount sufficient to compensate Wendy for the loss of her daughter's society and companionship, and relief for “the wrongful death of Emma Day.” On behalf of Emma, the deceased, it demanded the damages for Emma's pre-death pain and suffering. Finally, on behalf of Desirae and Hannah, the complaint demanded compensation for their severe emotional distress as well as an amount sufficient to compensate the girls for the loss of Emma's society and companionship.2

¶ 10 Holly tendered her defense to Allstate, which had issued a homeowner's policy listing Clinton and Holly as the named insureds.3 The policy, which includes coverage for family liability, provides in relevant part: “Subject to the terms, conditions and limitations of this policy, Allstate will pay damages which an insured person becomes legally obligated to pay because of bodily injury or property damage arising from an occurrence to which this policy applies, and is covered by this part of the policy.” It provides further: “If an insured person is sued for these damages, we will provide a defense with counsel of our choice, even if the allegations are groundless, false or fraudulent.”

¶ 11 The policy's grant of coverage is subject to various exclusions, including the following family exclusion: We do not cover bodily injury to an insured person ... whenever any benefit of this coverage would accrue directly or indirectly to an insured person.”

Allstate hired counsel to defend Holly, subject to its reservation of its right to deny coverage based on the family exclusion. The reservation of rights letter explained: [t]he Allstate policy contains an exclusion that provides that the policy does not cover bodily injury to an insured person. Some or all of the damages claimed in the complaint relate to bodily injury sustained by an insured person. Allstate does not believe that Holly Day is entitled to coverage for such damages.”

¶ 13 Allstate then moved to intervene as a party plaintiff “so that its obligation to provide insurance coverage to the defendant, Holly Day, relative to some or all of the claims set forth in the Complaint, can be determined.” It also moved for an order bifurcating insurance coverage issues from the underlying issues of liability and damages. Finally, Allstate filed a cross-complaint seeking judgment declaring that Allstate has no duty to defend or indemnify Holly in connection with some or all of the claims set forth in the complaint.

¶ 14 The circuit court granted Allstate's motion to intervene. The court ordered bifurcation of the case so that the insurance coverage issues would be decided first, and stayed discovery on the merits pending final determination on coverage.

¶ 15 Allstate then filed a third-party complaint, requesting that Clinton Day be joined as an interested party. It later explained that Clinton Day was joined by Allstate simply because, as one of Emma Day's parents, he owns a portion of the wrongful death cause of action brought by Wendy Day, and is therefore a necessary party in Allstate's declaratory judgment action. Clinton Day also paid for half of the funeral and related expenses, and would therefore own part of Emma's survivorship action.”

Several months later, the parties filed a series of stipulations with the court. First, they stipulated to Holly's dismissal. Wendy expressed her intention to proceed exclusively against Allstate's liability policy. 4 The parties further stipulated to the dismissal of the claims made on behalf of Desirae and Hannah. Finally, Wendy represented and stipulated that she was pursuing no claim against Clinton in connection with the action.

¶ 17 Based on the parties' stipulations, the court dismissed Holly, and it also dismissed with prejudice the claims of Desirae and Hannah. In addition, the court ordered: “No claim shall be pursued against Clinton Day, now or in the future, in connection with this action.” Finally, the court ordered that the complaint be amended to name Allstate as a defendant. As a result of the court order, the only remaining claims were the survival action 5 advanced on behalf of Emma's estate and Wendy's claim for wrongful death.

Allstate moved for summary judgment. With regard to the survival claim, it argued that [t]he Allstate policy provides no coverage for the claims brought by Wendy Day as Emma Day's personal representative because they are based on Emma's bodily injury, the recovery for which would directly benefit the estate of the insured, Emma Day.” It argued further that because there was no coverage for the survival claim, there was likewise no coverage for the wrongful death claim. In response to Allstate's brief, Wendy filed a cross motion for summary judgment.

¶ 19 After hearing arguments, the circuit court issued a written decision. Addressing the survival claim, the circuit court assumed for the sake of argument that Emma was an insured under Clinton and Holly's policy. Nevertheless, it concluded that there was coverage under the policy for a claim brought by Emma's personal representative that would benefit her estate: “While bodily injury in the policy includes death, the direct or indirect benefit must accrue to an ‘insured person.’ [The policy] does not say to an insured person or their estate.” The court construed ambiguity against the insurer and concluded that “the phrase ‘insured person’ does not include an insured person's estate.”

¶ 20 Addressing Wendy's wrongful death claim, the court found that Wendy Day is clearly not an insured under Clinton Day's insurance policy with Allstate.” It explained that it was required to interpret the phrase “accrue directly or indirectly to an insured person.” Relying on this court's discussion of that phrase in Whirlpool Corp. v. Ziebert, 197 Wis.2d 144, 152, 539 N.W.2d 883 (1995), the circuit court determined: This court cannot, as a matter of law, find that any moneys that Wendy Day may receive would ‘be funneled through’ directly or indirectly” to Hannah or Desirae. (Emphasis in original.) The court concluded that coverage existed under the policy, and it granted Wendy's motion for summary judgment.

¶ 21 The court of appeals granted Allstate's ...

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