Rural Mut. Ins. Co. v. Peterson

Decision Date18 November 1986
Docket NumberNo. 85-0272,85-0272
Citation395 N.W.2d 776,134 Wis.2d 165
PartiesRURAL MUTUAL INSURANCE COMPANY, Plaintiff-Respondent, v. LeRoy O. PETERSON, Defendant-Appellant.
CourtWisconsin Supreme Court

Steven B. Goff (argued), for defendant-appellant; Bye, Krueger & Goff, S.C., River Falls, on brief.

Gregory J. Egan (argued), for plaintiff-respondent; Moen, Sheehan, Meyer & Henke, Ltd., La Crosse, on brief.

BABLITCH, Justice.

LeRoy O. Peterson (Peterson) is the insured of Rural Mutual Insurance Company (Rural). He appeals a summary judgment granting Rural's claim for reimbursement from him for $111,718.52 which was paid by Rural to an injured third party pursuant to Wisconsin's common carrier financial responsibility law. This court accepted certification from the court of appeals to decide 1) whether Rural is entitled to reimbursement from Peterson under the terms of its policy, and if so, 2) whether Peterson is entitled to a trial to determine his percentage of negligence and the amount of damages so that he may seek contribution from other joint tortfeasors.

Because neither state law nor public policy considerations prohibit the reimbursement provision of the policy, we hold that Rural is entitled to reimbursement from Peterson under the terms of the policy. We further hold that even if Peterson had a right to a trial on damages he has waived it.

The facts in this case are undisputed. Peterson operates a small trucking business. On or about December 18, 1979, Peterson purchased a motor vehicle insurance policy from Rural listing a 1972 Peterbilt truck and a 1974 Conr truck as insured vehicles. On January 17, 1980, a Form E blanket liability certificate was filed by Rural on Peterson's behalf with the Wisconsin Department of Transportation (DOT) pursuant to sec. 194.41(1), Stats., and Wis. Adm. Code Sec. Trans. 176.02(1)(a). The Form E certificate must be filed as proof that the common carrier has procured insurance as required by statute to cover fleet vehicles.

On February 25, 1980, Peterson purchased a 1978 Peterbilt tractor which was subsequently leased by Peterson to Myron H. Beguelin (Beguelin). Peterson did not list the 1978 Peterbilt as an insured vehicle with Rural. Under the terms of the lease agreement Beguelin was to purchase enough primary public liability and property damage insurance for the 1978 Peterbilt to meet the prescribed minimums imposed by the various states. Beguelin purchased a policy covering the 1978 Peterbilt from Canal Insurance Company with limits of $100,000.

On April 23, 1980, during the lease term to Beguelin, the 1978 Peterbilt was involved in an accident causing injuries to Stephen G. Brohmer (Brohmer) in Monroe county, Wisconsin. A lawsuit was then filed in Monroe county by Brohmer. His claim against Peterson was for an amount in excess of the insurance coverage provided by all of the insurers that were involved in the lawsuit, and specifically in excess of the primary $100,000 policy of Canal Insurance Company.

Rural filed a motion for summary judgment in the Brohmer suit asserting that because the 1978 Peterbilt was not a listed vehicle in the policy, the policy did not provide coverage for the damage sustained by Brohmer. Rural further argued that sec. 194.41, Stats., and the blanket Form E filing did not, by operation of law, provide such coverage to Brohmer. This motion was denied and the Honorable James W. Rice, in a memorandum decision, found blanket coverage by operation of sec. 194.41(1) under Rural's policy for the unlisted vehicle involved in the Brohmer accident. This issue was not appealed and is therefore not before us.

On January 6, 1983, Peterson's attorney sent a certified letter to Rural's attorney demanding that Rural settle the case to avoid any exposure to Peterson. The Brohmer suit was subsequently settled with Rural contributing approximately $104,700 toward that settlement. However, Peterson refused to sign the settlement agreement because it did not release any claims Rural may have had for reimbursement against him. Rural then filed suit against Peterson seeking reimbursement of the settlement contribution. Peterson answered and counterclaimed for harassment and bad faith by Rural.

Rural's demand for reimbursement is based upon paragraph 6, page 8 of Peterson's policy with Rural, which reads as follows:

"When this policy is certified as proof of financial responsibility for the future under the provisions of the motor vehicle financial responsibility law of any state or province, such insurance as is afforded by this policy for bodily injury liability or for property damage liability shall comply with the provisions of such law which shall be applicable with respect to any such liability arising out of the ownership maintenance or use of the automobile during the policy period, to the extent of the coverage and limits of liability required by such law, but in no event in excess of the limits of liability stated in this policy. The insured agrees to reimburse the company for any payment made by the company which it would not have been obligated to make under the terms of this policy except for the agreement contained in this paragraph." Standard Automobile Policy, issued by Rural to Peterson, p. 8, paragraph 6. (Emphasis added.)

Each side moved for summary judgment and a stipulated set of facts was submitted by the parties to the Honorable Robert N. Ledin.

In his memorandum decision dated December 20, 1984, Judge Ledin granted Rural's motion for summary judgment, dismissed Peterson's counterclaim, and granted judgment for Rural in the amount of $111,718.52. The judgment included the payment made by Rural to settle the Brohmer case plus attorney's fees.

The first issue in this case, the enforceability of the contract reimbursement clause, involves the construction of state statutes, administrative codes, and insurance contract provisions, which are questions of law. Therefore the issue will be reviewed ab initio. Cunningham v. Metropolitan Life Ins. Co., 121 Wis.2d 437, 450, 360 N.W.2d 33 (1985); First Nat. Leasing Corp. v. Madison, 81 Wis.2d 205, 208, 260 N.W.2d 251 (1977). The second issue, whether Peterson is entitled to a trial on damages or whether such a right has been waived, also involves a question of law which we will review ab initio. See Employers Insurance of Wausau v. Sheedy, 42 Wis.2d 161, 166 N.W.2d 220 (1969).


Parties are at liberty to enter insurance contracts which specify the coverage afforded by the contract as long as the contract terms do not contravene state law or public policy. McPhee v. American Motorists Ins. Co., 57 Wis.2d 669, 673, 205 N.W.2d 152 (1973); see also Olander v. Klapprote, 263 Wis. 463, 465, 57 N.W.2d 734 (1953) (the right to limit an insurer's liability by terms of contract not questioned unless restriction is prohibited by statute or considerations of public policy). Peterson argues and we recognize that there is a general rule that an insurer has no right of subrogation or indemnification against its own insured, Hallmark Ins. Co. v. Crary Enterprises, Inc., 72 Wis.2d 472, 474, 241 N.W.2d 171 (1976); 6A J.A. Appleman & J. Appleman, Insurance Law & Practice, sec. 4055 (1972). However exceptions have been recognized in instances where state law and public policy are not undermined. E.g., Bennett v. The Preferred Acc. Ins. Co. of New York, 192 F.2d 748 (10th Cir.1951) (applying Oklahoma law); accord 8B Appleman,Insurance Law & Practice sec. 4945. We conclude that the reimbursement provision at issue in this case is neither prohibited by statute nor public policy and is therefore enforceable.

We begin by noting that neither sec. 194.41, Stats., nor any other statute, prohibits the type of reimbursement clause found in Peterson's contract with Rural. Section 194.41 is the financial responsibility law for motor carriers. It provides that no permit may be issued to a common motor carrier to operate any of its vehicles unless an approved certificate for a policy of insurance is filed with the DOT and is in effect. This filing certifies that the insurer has provided liability coverage to the insured motor carrier for damages from injuries or death of persons arising from the negligent operation of the insured's vehicles. Section 194.41(1). The statute also directs the DOT to set the minimum amount of insurance required. In this case $100,000 coverage was required by law. Wisconsin Adm. Code sec. Trans. 176.06. The statute also permits the DOT to require blanket filings of insurance. This means that all the insured's vehicles are covered as required by sec. 194.41, regardless of whether the vehicle is specifically listed in the policy. Section 194.41(5).

The DOT, the agency charged with the "administration and enforcement" of the statute pursuant to sec. 194.41(4), Stats., has apparently determined that the statute permits reimbursement. Regulations issued by the DOT require a certificate of insurance to be filed with it on Form E, the Uniform Motor Carrier Bodily Injury and Property Damage Liability Certificate of Insurance. Wisconsin Adm. Code Sec. Trans. 176.02(a). The regulations also require that whenever a Form E blanket filing is made, Form F, an endorsement which becomes part of the insurance policy be attached to it. Wisconsin Adm. Code Sec. Trans. 176.02(b). That endorsement provides that: "the insured agrees to reimburse the company for any payment made by the company which it would not have been obligated to make under the terms of this policy except by reason of the obligation assumed in making such certification." Wisconsin Adm. Code Sec. Trans. 176, Appendix II. Thus, Form F permits reimbursement of the insurer by the insured when liability results from the operation of the law, sec. 194.41, and not from the terms of the policy.

Notwithstanding the absence of a statutory prohibition against...

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