Millers Nat. Ins. Co. v. City of Milwaukee

• Decision Date: 01 June 1994
• Docket Number: No. 91-2536,91-2536
• Parties: MILLERS NATIONAL INSURANCE COMPANY, Plaintiff-Appellant, v. CITY OF MILWAUKEE, Defendant-Respondent-Petitioner.
• Court: Wisconsin Supreme Court

Page 376

516 N.W.2d 376

184 Wis.2d 155

MILLERS NATIONAL INSURANCE COMPANY, Plaintiff-Appellant, v. CITY OF MILWAUKEE, Defendant-Respondent-Petitioner.

No. 91-2536.

Supreme Court of Wisconsin.

Argued March 1, 1994.

Decided June 1, 1994.

For plaintiff-appellant there was a brief by Ernest J. Philipp, Maria K. Myers and Davis & Kuelthau, S.C., Milwaukee and oral argument by Maria K. Myers. DAY, Justice.

This is a review of a decision of the court of appeals reversing a judgment of the circuit court for Milwaukee County, Honorable Patrick J. Madden, Judge, denying a claim by plaintiff, Millers National Insurance Company (Millers National), for subrogation against the City of Milwaukee (City), 177 Wis.2d 573, 503 N.W.2d 284. The circuit court dismissed the action on summary judgment for failure to state a claim upon which relief can be granted. ¹ The court of appeals reversed, concluding that the City was obligated to provide uninsured motorist (UM) coverage under sec. 66.189, Stats., ² and that Millers National could make out a claim for subrogation from the City after payment to its insured, City of Milwaukee police officer Michael McGuire (Officer McGuire), by virtue of the appropriate provisions in its insurance contract. We affirm the court of appeals.

Officer McGuire was operating a city motorcycle in the course of his employment when he was struck and injured by an uninsured motorist on December 24, 1985. Following the accident, Officer McGuire and his attorney contacted the City about a claim under sec. 66.189, Stats., which provides that 1st class cities "shall" provide UM insurance coverage for motor vehicles owned by the city and operated by city employees in the course of employment. Section 632.32(4)(a) requires coverage limits of at least $25,000 per person and $50,000 per accident.

Officer McGuire was informed, however, that the City had no insurance coverage from which to pay him. Owing to the City's response, Officer McGuire then sought collection from his personal insurer, Millers National. Officer McGuire's policy with Millers National contained a UM coverage clause, providing UM coverage as excess insurance if Officer McGuire was injured while operating a vehicle he did not own. ³

Millers National also contacted the City about a claim on behalf of Officer McGuire but was informed that the City had cancelled its UM coverage and had been unable to replace the coverage. A letter addressed to Millers National from the Deputy City Attorney stated: "Please be informed that the City of Milwaukee's uninsured motorist coverage was cancelled on September 14, 1985. The City has been unable to replace that coverage. Accordingly, none was in effect on December 24, 1985."

Millers National honored the claim, paying Officer McGuire $42,303.53 for his damages. ⁴ Subsequently, Millers National made a claim with the City for the amount of $25,000, the minimum amount that must be provided by the City under sec. 66.189, Stats. The City responded that subrogation was not available to Millers National under sec. 66.189. Millers National then brought the present action.

The circuit court dismissed Millers National's claim on summary judgment because it agreed with the City that subrogation was unavailable to Millers National under sec. 66.189, Stats. The circuit court concluded that the City owed its duty under sec. 66.189, only to Officer McGuire and not to Millers National, and therefore Millers National had no remedy against the City. The circuit court did acknowledge that subrogation may be possible as between two insurers, provided one insurer possesses superior equity. However, it denied subrogation to Millers National because it concluded that the City was not a tortfeasor here, and therefore, since both the City and Millers National were secondarily liable to Officer McGuire, there was no superior equity possessed by Millers National which would justify recovery against the City.

The court of appeals reversed, holding that sec. 66.189, Stats. requires the City to provide UM insurance protection on its vehicles. It concluded that the City's responsibility to provide UM insurance coverage is the same whether the City is self-insured or otherwise insured. It reasoned that if the City elects to be self-insured under sec. 66.189, the City will be treated as any other insurer for the purposes of sec. 66.189, and for subrogation purposes. Accordingly, applying the standard rules of subrogation, the court of appeals determined that Millers National was entitled to pursue a claim of contractual subrogation. The City's argument that payment to Millers National would violate the public purpose doctrine was rejected. We affirm the court of appeals.

This case first requires the interpretation of sec. 66.189, Stats., and the application of that statute to a set of undisputed facts. These issues are reviewed independently by this court without deference to the decisions of the circuit or appellate courts. Ball v. District No. 4 Area Bd., 117 Wis.2d 529, 537, 345 N.W.2d 389 (1984). Second, since this case was decided on summary judgment, we follow the standard of review as set forth in sec. 802.08, Stats. Green Spring Farms v. Kersten, 136 Wis.2d 304, 315, 401 N.W.2d 816 (1987). This court can reverse the trial court if we find that the trial court incorrectly decided a legal issue. Prince v. Bryant, 87 Wis.2d 662, 666, 275 N.W.2d 676 (1979). Third, to the extent we must interpret specific provisions of the insurance contract at issue, we do so as a question of law. West Bend Mut. v. Playman, 171 Wis.2d 37, 40, 489 N.W.2d 915 (1992). Finally, the application of subrogation law, an equitable doctrine in origin, is ultimately decided by this court without deference to the circuit or appellate courts. Employers Health Ins. v. General Cas., 161 Wis.2d 937, 956, 469 N.W.2d 172 (1991).

Many important issues are not in dispute. The City does not dispute that sec. 66.189, Stats., requires the City to provide UM coverage for its vehicles. American Family Ins. Co. v. Milwaukee, 148 Wis.2d 280, 285, 435 N.W.2d 280, 283 (Ct.App.1988) (Petition to review denied ). The City acknowledges that it is responsible for at least $25,000 coverage under sec. 66.189, Stats. ⁵ The City recognizes that this requirement of the statute is constitutional on its face. The City admits further that it is "self-insured for purposes of sec. 66.189, Stats." Finally, the City concedes that, barring some defense to the claim, Officer McGuire himself would be entitled to collect directly under sec. 66.189.

The City contends, however, that Millers National is not entitled to subrogation under sec. 66.189, Stats. The City makes several arguments.

The City's first argument is that sec. 66.189, Stats., does not require the City to provide UM insurance coverage when the injury in question is covered by a private insurance policy. According to the City's interpretation, sec. 66.189, was only intended to provide a safety net of UM coverage, filling the gaps in coverage not provided for by private policies. The statute's objective is achieved, the City explains, by limiting the coverage provided by the municipality to those instances when no private coverage exists. If an injured person already has private UM coverage of $25,000 or greater, the City argues, coverage through the municipality is not required. Thus we understand the City to be arguing that Officer McGuire would have the choice to seek the UM coverage from either the City or a private insurer. However, once Officer McGuire had received payment for his injuries from his private insurer, the City would be under no obligation to reimburse the private insurer under subrogation.

We disagree. As the court of appeals correctly concluded in American Family, 148 Wis.2d at 285, 435 N.W.2d 280, sec. 66.189, Stats., clearly requires the City to provide UM coverage for its vehicles. This obligation is mandatory and categorical. The statute directs that the cities described in the statute "shall" provide UM insurance coverage. The word "shall" is presumed to be mandatory when it appears in a statute. Karow v. Milwaukee County Civil Serv. Comm., 82 Wis.2d 565, 570, 263 N.W.2d 214 (1978). This obligation is imposed without regard to whether city employees have purchased private insurance or not.

The only issue here is the nature and scope of the duty imposed by sec. 66.189, Stats., upon the City by the statute. The City retains considerable discretion as to how it wishes to comply with this statutory obligation to provide UM insurance coverage. As the court of appeals observed in American Family, 148 Wis.2d at 286, 435 N.W.2d 280, the City may provide this insurance in any number of ways. The City may purchase third-party insurance, it may form a municipal insurance mutual under sec. 611.11(4), Stats., it may rely upon self-insurance, or any other lawful means to provide the UM insurance coverage. However, regardless of which means the City chooses to provide insurance, the obligation is the same. The City is responsible for providing UM insurance coverage for its vehicles to a limit of at least $25,000. In this case, the City has admitted that it is self-insured for purposes of sec. 66.189, and has acknowledged that it is responsible for coverage limits of $25,000.

The fact that the City is self-insured does not diminish its obligation or diminish its answerability in subrogation. In this context, self-insurance is considered merely another form of insurance. See, Hillegass v. Landwehr, 176 Wis.2d 76, 81-82, 499 N.W.2d 652 (1993). Whether the City elects to contract with a third-party insurer to provide the coverage in exchange for premium payments, or whether the City elects to cover the risk itself through self-insurance and save the premium payments, the nature of insurance is the same. ⁶ By electing to self-insure, the City has effectively placed itself in the insurance business for the...