Hallmark Ins. Co. v. Crary Enterprises, Inc.

• Decision Date: 04 May 1976
• Docket Number: No. 701,701
• Citation: 72 Wis.2d 472,241 N.W.2d 171
• Parties: HALLMARK INSURANCE COMPANY, a Wisconsin Corporation, Appellant, v. CRARY ENTERPRISES, INC., a Wisconsin Corporation, and Sentry Insurance, a Mutual Company, Respondents. (1974).
• Court: Wisconsin Supreme Court

Page 171

241 N.W.2d 171

72 Wis.2d 472

HALLMARK INSURANCE COMPANY, a Wisconsin Corporation, Appellant, v. CRARY ENTERPRISES, INC., a Wisconsin Corporation, and Sentry

Insurance, a Mutual Company, Respondents.

No. 701 (1974).

Supreme Court of Wisconsin.

Submitted on briefs April 12, 1976.

Decided May 4, 1976.

Alfred S. Regnery and Stroud, Stroud, Willink, Thompson & Howard, Madison, for appellant.

Axley, Brynelson, Herrick & Gehl, Madison, for respondents.

HANLEY, Justice.

The sole issue presented on appeal is whether the nonliability status of an employee as an insured accrues to the benefit of his employer when the status is obtained independent of such employment.

In reaching its decision the trial court correctly acknowledged the general rule that an insurer cannot recover by right of subrogation from its own insured. Much emphasis was laid on the case of New Amsterdam Casualty Co. v. Homans-Kohler, Inc. (D.C.R.I.1969), 305 F.Supp. 1017, subsequent action, (1970), D.C.R.I., 310 F.Supp. 374, affirmed, 1 Cir., 435 F.2d 1232. See also 6A Appleman, Insurance Law and Practice sec. 4055 (rev.vol.1972); Culver v. Webb (1944), 244 Wis. 478, 491, 12 N.W.2d 731. Appleman notes that this situation often occurs in construction incidents where the negligent contractors and subcontractors are additional insureds under the owner's fire policy.

The problem involved here is not so much a matter of subrogation as it is a matter of respondeat superior. Employee nonliability as an insured was seen to ascend to the employer on the basis of Miller v. Kujak (1958), 4 Wis.2d 80, 90 N.W.2d 137.

In that case a liability insurer had issued its policy to Moore Freight Lines who had leased a vehicle owned by Walske Transfer which was being driven by one Martin Kujak, a Walske employee and partner. An accident occurred in the course of his duties for the lessee. The insurer as subrogee for Moore sought indemnification from Walske Transfer. Under the policy endorsements issued in compliance with prevailing statutes, Martin Kujak was an additional insured and thus free from liability in the subrogation action.

The Miller court further held:

'Since Dodson cannot recover from Martin Kujak individually, it follows that he cannot recover from Walske Transfer.

Whether Walske Transfer be considered as Kujak's employer, for whose torts it may be liable under the doctrine of respondeat superior, or as a partnership liable for the torts of a partner in the course of the partnership business, any liability of Walske is derived from liability on the part of Kujak. Kujak not being liable because of his status as an insured, Walske is not liable in the premises.' Id. at 141.

Appellant has called attention to a seemingly contrary line of cases involving employee nonliability due to family immunity in regards to the injured party. In those decisions, the immunity did not flow to the employer along respondeat superior lines. LeSage v. LeSage (1937), 224 Wis. 57, 271 N.W. 369; Hensel v. Hensel Yellow Cab Co. (1932), 209 Wis. 489, 245 N.W. 159, A similar case involved a daughter allegedly acting as the agent of her father in negligently transporting her mother. Kauth v. Landsverk (1937), 224 Wis. 554, 271 N.W. 841.

There is no conflict between the above decisions. Neither is Miller dispositive of the case here. The correct rule of law is embodied in Restatement (Second) of Agency sec. 217, to which the appellant has made limited reference:

's 217. Where Principal or Agent has Immunity or Privilege

'In an action against a principal based on the conduct of a servant in the course of employment:

'(a) The principal has a defense if:

'(i) he had an immunity from liability to the person harmed, or

'(ii) he had a delegable privilege so to act, or

'(iii) the agent had a privilege which he properly exercised on his principal's behalf, or

'(iv) the agent did not fall below the duty of care owed by the principal to the third person.

'(b) The principal has no defense because of the fact that:

'(i) he had a non-delegable privilege to do the act, or

'(ii) the agent had an immunity from civil liability as to the act.'

Comments to this section bring the family immunity cases squarely within the rule stated in (b)(ii). 'Immunity' arises because of the relation between the injured and actor, or because of some other status of the actor. It is the non-delegable personal characteristic that yields nonliability. The act, however, was done for the benefit of the employer and it is the act, not the status of the actor, which transfers liability under the doctrine of respondent superior. See 77 C.J.S. Respondeat Superior, p. 318.

An insured's lack of liability in a subrogation action undertaken by his insurer does not fall within the contemplation of civil immunity as provided in the Restatement. The comments make clear that nonliability may also rest on privilege, specifically consent. Restatement (Second) of Torts sec. 10. Respondents implicitly acknowledge this in noting...