Hoffman v. Economy Preferred Ins. Co., No. 99-0762.

• Court: Court of Appeals of Wisconsin
• Writing for the Court: Before Cane, C.J., Hoover, P.J., and Peterson, J.
• Citation: 606 N.W.2d 590,2000 WI App 22,232 Wis.2d 53
• Parties: Cynthia HOFFMAN, Daniel Hoffman and Shawn, Troy and Cory Hoffman, minors by Attorney Greg Krug, Their Guardian ad Litem, Plaintiffs, FIRST AUTO & CASUALTY INSURANCE COMPANY and Family Health Center, Involuntary-Plaintiffs, v. ECONOMY PREFERRED INSURANCE COMPANY, Danielle Metz and James B. Metz, Defendants-Third-Party Plaintiffs-Appellants, v. BADGER MUTUAL INSURANCE COMPANY, Third-Party Defendant-Respondent.
• Decision Date: 07 December 1999
• Docket Number: No. 99-0762.

232 Wis.2d 53
2000 WI App 22
606 N.W.2d 590

Cynthia HOFFMAN, Daniel Hoffman and Shawn, Troy and Cory Hoffman, minors by Attorney Greg Krug, Their Guardian ad Litem, Plaintiffs,
FIRST AUTO & CASUALTY INSURANCE COMPANY and Family Health Center, Involuntary-Plaintiffs,
v.
ECONOMY PREFERRED INSURANCE COMPANY, Danielle Metz and James B. Metz, Defendants-Third-Party Plaintiffs-Appellants,
v.
BADGER MUTUAL INSURANCE COMPANY, Third-Party Defendant-Respondent

No. 99-0762.

Court of Appeals of Wisconsin.

Submitted on briefs November 3, 1999.

Decided December 7, 1999.

232 Wis.2d 55

On behalf of the defendants-third-party plaintiffs-appellants, the cause was submitted on the briefs of Matthew E. Yde of Strasser & Yde, Schofield

On behalf of the third-party defendant-respondent, the cause was submitted on the brief of John P. Runde of Terwilliger, Wakeen, Piehler & Conway, S.C., Wausau.

Before Cane, C.J., Hoover, P.J., and Peterson, J.

¶ 1. PETERSON, J.

Danielle and James Metz and their insurer, Economy Preferred Insurance Company,¹ (collectively Economy) appeal the circuit court's decision denying their motion for summary judgment and granting Badger Mutual Insurance Company's opposing motion. Economy also appeals the circuit court's decision finding its arguments frivolous and

232 Wis.2d 56

assessing sanctions. Economy argues that: (1) Badger's "pay and walk" policy provision is invalid; (2) Badger breached its duty to defend and indemnify the Metzes; and (3) Economy's arguments were not frivolous. We conclude that Badger's policy language was valid and, therefore, Badger did not breach any duty to defend the Metzes. However, we reverse the portion of the circuit court's judgment finding Economy's arguments frivolous because Economy did not have sufficient notice that frivolous sanctions might be imposed

BACKGROUND

¶ 2. Cynthia Hoffman was severely injured in an automobile accident when a truck operated by Danielle Metz collided with the van Hoffman was driving in June 1995. Metz was a minor driver, sponsored by her father. Badger considered Metz an additional insured because she had permission to use the truck from the truck's owners and its named insureds, Bruce and Pamela Emmerich.² Badger acknowledged primary liability and paid its policy limits of $100,000 to Hoffman.³ In exchange for the policy limits, Hoffman signed a release of all claims against Badger and the Emmerichs. However, she declined to release the Metzes.

¶ 3. Seeking damages beyond Badger's policy limit, Hoffman commenced this action against the Metzes and their insurer, Economy. Economy filed a

232 Wis.2d 57

third-party complaint against Badger claiming that it breached its duty to defend and indemnify the Metzes. Badger and Economy filed motions for summary judgment. The circuit court granted Badger's motion and denied Economy's, finding that Badger satisfied its responsibilities by fully paying its policy limits. It also concluded that Economy's arguments were frivolous and awarded actual costs

STANDARD OF REVIEW

[1, 2]

¶ 4. We review orders granting summary judgment de novo using the same methodology as the circuit court. See Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315-17, 401 N.W.2d 816, 820-21 (1987). Under § 802.08(2), STATS., a motion for summary judgment must be granted when there is no genuine issue of material fact.⁴

"PAY AND WALK" PROVISION

[3]

¶ 5. A "pay and walk" provision allows an insurer to terminate the defense of its insured by tendering its policy limits for settlement. Economy claims that Badger's insurance policy contains an invalid "pay and walk" provision because the provision is not highlighted by conspicuous print as required by Gross v. Lloyds of London, 121 Wis. 2d 78, 358 N.W.2d 266 (1984). In this case we must decide whether an inconspicuous

232 Wis.2d 58

provision is enforceable as applied to a permissive user. The enforcement of an insurance provision involves a question of law that this court reviews de novo. See id. at 84, 358 N.W.2d at 269.

In Gross, the court concluded that:

In order for an insurer to be relieved of its duty to defend upon tender of the policy limits, the "tendered for settlements" language must be highlighted in the policy and binder by means of conspicuous print, such as bold, italicized, or colored type, which gives clear notice to the insured that the insurer may be relieved of its duty to defend by tendering the policy limits for settlement.

Id. at 89, 358 N.W.2d at 271. The court fashioned the conspicuous language...