Marsh v. Farm Bureau Mut. Ins. Co.

• Court: Wisconsin Court of Appeals
• Writing for the Court: LaROCQUE
• Citation: Marsh v. Farm Bureau Mut. Ins. Co., 179 Wis.2d 42, 505 N.W.2d 162 (Wis. App. 1993)
• Decision Date: 26 July 1993
• Docket Number: No. 92-2491,92-2491
• Parties: Paul D. MARSH and Cynthia J. Marsh, Plaintiffs-Respondents, d v. FARM BUREAU MUTUAL INSURANCE COMPANY, Defendant-Appellant. . Oral Argument

Page 162

505 N.W.2d 162

179 Wis.2d 42

Paul D. MARSH and Cynthia J. Marsh, Plaintiffs-Respondents,^d v. FARM BUREAU MUTUAL INSURANCE COMPANY, Defendant-Appellant.

No. 92-2491.

Court of Appeals of Wisconsin.

Oral Argument July 26, 1993.

Opinion Released Aug. 31, 1993.

Opinion Filed Aug. 31, 1993.

Before CANE, P.J., and LaROCQUE and MYSE, JJ.

LaROCQUE, Judge.

Farm Bureau Mutual Insurance Company appeals a judgment awarding Paul and Cynthia Marsh medical and hospital expenses, attorney's fees and costs, bad faith damages and punitive damages. Farm Bureau raises numerous arguments. However, because Wisconsin did not have personal jurisdiction over Farm Bureau, we address only that issue and reverse the judgment.

The facts are as follows: Minnesota resident Paul Marsh occupied a car that was being towed when it was struck by Marjorie Breuer. Breuer is a Wisconsin resident, and the accident occurred in Wisconsin. Marsh reported the accident to his insurer, Farm Bureau. The car that Marsh was occupying had just been purchased and was uninsured, but as the car was a replacement vehicle for an insured vehicle, Farm Bureau agreed to provide liability coverage but not collision coverage. Farm Bureau collected a premium for the new coverage.

Farm Bureau is an Iowa company licensed to do business in Iowa, Minnesota, South Dakota, Arizona, Missouri and Utah. Marsh's insurance policy is a Minnesota contract and was drafted pursuant to Minnesota law. Moreover, the contract was executed in Minnesota.

Marsh filed a pro se small claims action in Wisconsin against Breuer for the property damage to his vehicle, and Breuer and her insurer, Horace Mann Insurance Company, filed a counterclaim against Marsh for property damage to her car. Marsh claims that he telephoned his Farm Bureau agent concerning Breuer's counterclaim. Marsh was referred to Wisconsin attorney Terrence Gherty, who agreed to represent Marsh. Gherty added a personal injury claim.

Farm Bureau alleges that it did not become aware of Breuer's counterclaim until eight months after it was filed, when Horace Mann sent a letter informing Farm Bureau of the countersuit. After the counterclaim was brought to Farm Bureau's attention, it decided that it would not defend Marsh in the small claims action because Marsh had never brought the counterclaim to its attention and because Marsh already had obtained representation. Farm Bureau's position was succinctly expressed in an interoffice memorandum, which stated:

In reviewing this matter with you and Paul Olson, it would appear that at this time we should let the matter be resolved by St. Croix County Circuit Court and if any judgement (sic) is entered against our insured, proceed with payment. I don't feel at this time we should hire the services of an attorney as our insured has never called our attention to the counter suit. What I'm saying is let the chips fall where they may and find out who pays what....

The jury found that both Marsh and Breuer were negligent, but that Marsh's actions had not caused Breuer any property damage and that Breuer's actions had not caused any injuries to Marsh. The jury further found that Marsh would incur no future medical or hospital expenses. Consequently, Farm Bureau informed Marsh it would no longer provide personal injury protection (PIP) benefits to him.

The Marshes then filed an action in Wisconsin alleging that Farm Bureau had acted in bad faith by failing to defend Paul Marsh and by wrongfully denying PIP benefits. Farm Bureau moved to dismiss the complaint arguing that Wisconsin lacked personal jurisdiction over Farm Bureau. This motion was denied, and a petition for leave to appeal an interlocutory order was filed, which we denied. Farm Bureau then moved for summary judgment contending that Minnesota law controlled and that Minnesota law precluded bad faith or punitive damages based on a breach of an insurance contract. The trial court found that Wisconsin law controlled and granted the Marshes partial summary judgment, finding that Farm Bureau had failed to defend Paul Marsh.

At trial, the jury awarded the Marshes $20,235.70 in attorney's fees and costs because of Farm Bureau's failure to defend. The jury found that Farm Bureau breached its contract by failing to pay for a $91 chiropractor bill. The jury also found that Farm Bureau's action constituted bad faith, awarding the Marshes $60,000 as compensation, and that Farm Bureau's conduct was outrageous, awarding punitive damages of $550,000. Farm Bureau subsequently brought this appeal. Additional facts will be provided as needed throughout the opinion.

Personal jurisdiction is a question of law that we review de novo. Brown v. LaChance, 165 Wis.2d 52, 65, 477 N.W.2d 296, 302 (Ct.App.1991). The determination of whether Wisconsin courts have jurisdiction over a nonresident-defendant is a two-step process. ¹ First, it must be determined whether a defendant's contacts with Wisconsin subject him to jurisdiction under Wisconsin's long-arm statute. In re Liquidation of All-Star Ins., 110 Wis.2d 72, 76, 327 N.W.2d 648, 650 (1983). If so, then the court must determine whether the exercise of jurisdiction under the statute comports with due process requirements. Id.

The long-arm statute is to be liberally construed in favor of exercising jurisdiction. Lincoln v. Seawright, 104 Wis.2d 4, 9, 310 N.W.2d 596, 599 (1981). The trial court found personal jurisdiction under Wisconsin's long-arm statute, sec. 801.05(10), Stats., which provides:

In any action which arises out of a promise made anywhere to the plaintiff or some 3rd party by the defendant to insure upon or against the happening of an event and in addition either:

(a) The person insured was a resident of this state when the event out of which the cause of action is claimed to arise occurred; or

(b) The event out of which the cause of action is claimed to arise occurred within this state, regardless of where the person insured resided.

The trial court found that Farm Bureau's tort of bad faith occurred in Wisconsin when it failed to defend, and therefore Wisconsin had personal jurisdiction even though Marsh resided in Minnesota.

Farm Bureau tacitly concedes that Wisconsin has personal jurisdiction under the long-arm statute, presumably because the cause of action, i.e., Farm Bureau's failure to defend, occurred in Wisconsin. Instead, Farm Bureau argues that Wisconsin's exercise of personal jurisdiction offends due process. Compliance with the long-arm statute is presumed to be compliance with due process requirements. Brown, 165 Wis.2d at 67, 477 N.W.2d at 303. Thus, Farm Bureau has the burden of overcoming the presumption that Wisconsin's personal jurisdiction would not violate due process.

The due process clause permits a state court to exercise jurisdiction over a nonresident if there are "minimum contacts" between the defendant and the forum state and the exercise of jurisdiction does not violate traditional notions of fair play and substantial justice. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945); In re All-Star Ins., 110 Wis.2d at 77, 327 N.W.2d at 651.

In order to establish minimum contacts, the defendant must purposefully avail himself of the privilege of conducting business in the forum state, thus invoking the benefits and protections of its laws. Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239-40, 2 L.Ed.2d 1283 (1958). The defendant's activity vis-a-vis the forum state is the crucial question; the unilateral activity of one seeking to claim a relationship with a defendant cannot satisfy the minimum contacts. Id.; Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-75, 105 S.Ct. 2174, 2183-84, 85 L.Ed.2d 528 (1985). The touchstone of the exercise of personal jurisdiction is reasonableness and fairness. In re All-Star Ins., 110 Wis.2d at 78, 327 N.W.2d at 651. The defendant's conduct and connection with the forum state must be such that he should reasonably anticipate being haled into court there. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980).

The Marshes argue that Farm Bureau has several contacts with Wisconsin. These include the new insurance policy Farm Bureau sold to Marsh to protect him from any liability resulting from the accident; Farm Bureau's refusal to assist Marsh in recovering property damage, thus forcing Marsh to recover his damages in Wisconsin and making a future lawsuit foreseeable; Farm Bureau's seeking subrogation in Wisconsin; Farm Bureau's failure to defend Marsh on the counterclaim against him in Wisconsin; and Farm Bureau's threats and harassment of Marsh to get him to stipulate to Farm Bureau's subrogation interest. None of these contacts permit Wisconsin to exercise personal jurisdiction.

First, the insurance contract between Farm Bureau and Marsh is not a contact with the state of Wisconsin. In In re All-Star Ins., the Wisconsin Supreme Court found a contract between a Wisconsin insurer and two nonresident insurance agencies that did no business in Wisconsin was a contact sufficient to support personal jurisdiction. The court's reasoning relied heavily on the fact that the Wisconsin insurer was in liquidation and a special jurisdictional statute had been enacted that evinced the state's interest in providing an efficient and inexpensive forum for liquidation of Wisconsin insurers for the benefit of Wisconsin residents. Id. at 83, 327 N.W.2d at 653-54. This case does not involve any special jurisdictional statutes, any Wisconsin parties, or the need to protect the interests of any Wisconsin residents.

We are persuaded by the Arizona Supreme Court in Batton v. Tennessee Farmers Mut. Ins. Co., 153 Ariz. 268, 736 P.2d 2 (1987), where a nonresident insured was involved in an accident in Arizona, and his Arizona attorney applied for reimbursement of medical expenses from the insurer, who did no business in...