Meyer v. Classified Ins. Corp. of Wisconsin

• Citation: 179 Wis.2d 386,507 N.W.2d 149
• Decision Date: 27 July 1993
• Docket Number: No. 92-2796,92-2796
• Parties: Suzanne M. MEYER and Michael Meyer, Plaintiffs-Respondents, v. CLASSIFIED INSURANCE CORPORATION OF WISCONSIN, Defendant-Appellant, d ]] Raymond W. LANGHOFF and Economy Fire & Casualty Company, Defendants. . Oral Argument
• Court: Court of Appeals of Wisconsin

Page 149

507 N.W.2d 149

179 Wis.2d 386

Suzanne M. MEYER and Michael Meyer, Plaintiffs-Respondents, v. CLASSIFIED INSURANCE CORPORATION OF WISCONSIN Defendant-Appellant, ^d]] Raymond W. LANGHOFF and Economy Fire & Casualty Company, Defendants.

No. 92-2796.

Court of Appeals of Wisconsin.

Oral Argument July 27, 1993.

Opinion Released Sept. 22, 1993.

Opinion Filed Sept. 22, 1993.

Before BROWN, NETTESHEIM and SNYDER, JJ.

SNYDER, Judge.

Classified Insurance Corporation of Wisconsin appeals from a judgment entered against it pursuant to coverage provided by an underinsured motorist endorsement issued to Suzanne M. and Michael Meyer. The issues on appeal are: (1) whether Classified had an absolute right under sec. 788.02, Stats., to a stay of judicial proceedings in order to arbitrate the Meyers' underinsured motorist claim, and (2) whether the trial court erred in deciding that Classified waived its contractual and statutory right to arbitration by requesting arbitration one week before the scheduled trial and twenty days after the trial court's deadline for motions pursuant to its scheduling order. Because we conclude that the statutory right to arbitrate a claim is not absolute and may be waived, and that Classified waived its right to arbitration, we affirm.

Suzanne and her husband Michael commenced a lawsuit against Raymond W. Langhoff and his insurer, Economy Fire & Casualty Company, to recover damages for injuries Suzanne received from a collision between the Meyers' vehicle and Langhoff's vehicle on October 28, 1987. In addition, the Meyers joined their own insurer, Classified, making a claim under the underinsured motorist endorsement of their automobile insurance policy. Classified's underinsured motorist endorsement contained an arbitration clause providing that if either party disputed the insured's right to recover damages or the amount of damages, either party could demand arbitration to determine the disputed issues.

From the outset, Langhoff denied negligence and Classified contested coverage, liability and damages. The trial court entered a scheduling order on July 10, 1991 requiring that all motions be filed and heard by May 1, 1992 and setting a jury trial date for May 27, 1992. On May 15, 1992, Classified was advised that Langhoff and Economy had settled with the Meyers by Economy paying them the $100,000 policy limits available under its policy in exchange for a full release. Immediately upon learning of this settlement, Classified wrote a letter to the trial court asserting its right to arbitration under the arbitration clause of the underinsured motorist endorsement. Prior to this, Classified made no such request.

On May 19, 1992, the Meyers' counsel wrote to the trial court and objected to Classified's demand for arbitration on a timeliness basis and requested that the matter continue to jury trial consistent with the scheduling order. Classified then filed a motion to obtain a stay of all proceedings pursuant to sec. 788.02, Stats., so that it could arbitrate the Meyers' underinsured motorist claims.

The trial court denied Classified's motion for a stay and referral to arbitration on the basis that Classified waived its right to arbitrate the matter. The action was subsequently tried to a jury, which returned a verdict in favor of the Meyers and in excess of Economy's $100,000 policy limits, thereby exposing Classified's coverage under the underinsured motorist endorsement. Classified then moved to set aside the verdict of the jury and submit the issues of coverage, liability and damages to an arbitration panel based upon the arbitration clause, sec. 788.02, Stats., and certain language contained in Vogt v. Schroeder, 129 Wis.2d 3, 29-30, 383 N.W.2d 876, 887 (1986) (Steinmetz, J., concurring). The trial court again denied the motion. Classified appeals.

RIGHT TO ARBITRATION

The first issue is whether Classified had an absolute right under sec. 788.02, Stats., to arbitration and a stay of the judicial proceedings. The application of sec. 788.02 to undisputed facts involves a question of law which we review without deference to the trial court. Park Bank-West v. Mueller, 151 Wis.2d 476, 482, 444 N.W.2d 754, 757 (Ct.App.1989). Classified argues that "[i]t appears under the statute and the case law that Judge Becker did not have any discretion to deny Classified's request for an order to stay proceedings and request arbitration." We disagree.

Wisconsin courts have recognized that there are circumstances where a party may be deemed to have waived arbitration. J.J. Andrews, Inc. v. Midland, 164 Wis.2d 215, 223, 474 N.W.2d 756, 759 (Ct.App.1991). The general rule on waiver of arbitration was set forth by the supreme court in City of Madison v. Frank Lloyd Wright Found., 20 Wis.2d 361, 387, 122 N.W.2d 409, 423 (1963), as follows:

[A]ny conduct of the parties inconsistent with the notion that they treated the arbitration provision as in effect, or any conduct which might be reasonably construed as showing that they did not intend to avail themselves of such provision, may amount to a waiver thereof and estop the party charged with such conduct from claiming its benefits. [Emphasis omitted.]

Therefore, since arbitration may be waived based upon conduct, Classified's assertion that it has an absolute right to arbitration is erroneous.

The express language of sec. 788.02, Stats., also indicates that the right to arbitration is not absolute:

If any suit or proceeding be brought upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration. [Emphasis added.]

Whether an applicant for a stay is in default requires a judicial determination that necessarily qualifies the mandatory "shall" language urged by Classified. Therefore, we conclude that under sec. 788.02 and the relevant case law, an applicant does not have an absolute right to a stay of judicial proceedings and referral to arbitration.

Classified also looks to the language of its contract in asserting its right to arbitration. The underinsured motorist coverage endorsement states in part:

ARBITRATION

If an insured person and we do not agree (1) that the person is legally entitled to recover damages from the owner or operator of an underinsured motor vehicle, or (2) as to the amount of payment under this Part, either that person or we may demand that the issue be determined by arbitration.

The construction of a written contract is normally a matter of law for the court. Levy v. Levy, 130 Wis.2d 523, 528, 388 N.W.2d 170, 172 (1986). The arbitration clause does not require arbitration but allows that either the insured or Classified "may demand that the issue be determined by arbitration." Arbitration is not mandatory according to the endorsement language. Even if we equated "demand that the issue be determined by arbitration" with the absolute right to arbitration, such an interpretation would be contrary to the waiver analysis deemed appropriate by the supreme court in City of Madison when considering requests for arbitration under ch. 788, Stats. Since Classified's contract is subject to Wisconsin law and does not specifically negate the provisions and application of ch. 788, the waiver analysis applicable to Wisconsin's arbitration law applies. See City of Madison, 20 Wis.2d at 383-84, 122 N.W.2d at 421.

Classified argues that this case is controlled by our holding in J.J. Andrews. We disagree. In J.J. Andrews, the trial court granted a motion by the plaintiff to stay the pending legal action and refer the issue to arbitration after some discovery had occurred. J.J. Andrews, 164 Wis.2d at 220, 474 N.W.2d at 758. In doing so, the trial court applied sec. 788.02, Stats., consistent with Wisconsin's policy to encourage arbitration as an alternative to litigation with the goal of obtaining a speedy, inexpensive and final resolution of disputes. The facts of the present case are not analogous. Unlike J.J. Andrews, Classified demanded arbitration after discovery was completed and one week before the trial date.

In addition, J.J. Andrews acknowledged the rule on waiver of arbitration set forth in City of Madison and held that conduct which results in discovery does not waive arbitration. J.J. Andrews, 164 Wis.2d at 223-24, 474 N.W.2d at 759-60. However, that holding does not preclude a trial court from looking at other or additional conduct that might support a finding of waiver of arbitration.

Classified reads the J.J. Andrews language, that "[u]p to the point of trial, arbitration remains a viable alternative to litigation," id. at 224, 474 N.W.2d at 759, to mean that the right to arbitration is absolute until the start of the trial itself. We disagree with that reading and interpret the J.J. Andrews language to hold that a stay of trial and referral to arbitration can be requested until the start of the trial but need not be granted if waived by the earlier...