Settlement for Personal Injuries of Konicki, Matter of

• Decision Date: 10 February 1994
• Docket Number: 93-0743,Nos. 92-2723,s. 92-2723
• Citation: 186 Wis.2d 140,519 N.W.2d 723
• Parties: In re the Matter of the SETTLEMENT FOR PERSONAL INJURIES OF Denise R. KONICKI. ALLSTATE INSURANCE COMPANY, Appellant, d v. Denise R. KONICKI, Respondent. . Oral Argument
• Court: Wisconsin Court of Appeals

Page 723

519 N.W.2d 723

186 Wis.2d 140

In re the Matter of the SETTLEMENT FOR PERSONAL INJURIES OF Denise R. KONICKI ALLSTATE INSURANCE COMPANY, Appellant, ^d v. Denise R. KONICKI, Respondent.

Nos. 92-2723, 93-0743.

Court of Appeals of Wisconsin.

Oral Argument Feb. 10, 1994.

Opinion Released June 23, 1994.

Opinion Filed June 23, 1994.

Before EICH, C.J., GARTZKE, P.J., and DYKMAN, J.

EICH, Chief Judge.

The issues in this case involve the interpretation and application of "underinsured" and "uninsured" motorist coverages in a policy of automobile liability insurance.

I. BACKGROUND AND ISSUES

Denise Konicki, while a minor, was seriously injured in an automobile accident. Because the responsible party's insurance was insufficient to cover her damages, she sought recovery under the underinsured motorist provisions of her parents' Allstate Insurance Company automobile liability policy. The policy covered two automobiles and provided underinsured motorist coverage of $100,000. Believing that, under the law, underinsured motorist coverage for the two automobiles could not be "stacked," she settled for the $100,000 policy limit applicable to the car involved in the accident (less the $50,000 received from the responsible party's insurer).

Later, Konicki sought to vacate the settlement to seek additional recovery under the policy. She did not dispute that, under then existing law, uninsured motorist coverage could be stacked, but underinsured coverage could not. She argued, however, that because the Allstate policy defined underinsured coverage as a subcategory of uninsured coverage, it could be stacked, thus entitling her to additional recovery.

The trial court agreed; it granted the motion to reopen and, ruling that the coverage provided for the two automobiles listed on the policy could be stacked, awarded Konicki an additional $100,000, together with prejudgment interest.

Allstate appeals, arguing that: (1) the trial court erroneously exercised its discretion in reopening the judgment on the facts of the case; (2) the court's ruling that the coverage provided for the two automobiles could be "stacked" is erroneous as a matter of law; ¹ and (3) the court erred in awarding prejudgment interest to Konicki.

We conclude that the trial court did not err either in fact or law when it reopened the judgment and ruled that the coverages could be stacked. We also conclude, however, that the court's findings are insufficient to support the award of prejudgment interest and we remand for further proceedings to determine the factual issues surrounding Konicki's claim for prejudgment interest at both common law and under § 628.46, STATS.

II. FACTS

The underlying facts are not in dispute. In May 1986, Denise Konicki, a passenger in an automobile driven by Tamara Udulitch, was severely injured when Udulitch's car went out of control and Denise was thrown from the car. Because the $50,000 policy limit of Udulitch's liability insurance was inadequate to cover Denise's damages, she sought to recover under the "underinsured motorist" coverage in her parents' Allstate policy.

Denise was represented in the settlement negotiations by her guardian ad litem, William Greenhalgh. James Konicki, Denise's father, who is an insurance agent, did not provide Greenhalgh with a copy of the policy or its declarations page but gave him only a packet of Allstate brochures. Greenhalgh then requested that Allstate provide him with a copy of the policy, and the company responded by sending him a description of the policy and a certification of the coverage in effect for the car involved in the accident. It did so based on its understanding that, under applicable Wisconsin case law at the time, underinsured motorist coverage--unlike uninsured motorist coverage--could not be "stacked" so as to increase the total policy recovery limits.

Based on that information, Greenhalgh negotiated an agreement with Allstate to settle Konicki's claim for $50,000--subtracting the $50,000 received from Udulitch's insurer from the total coverage of $100,000. The trial court approved the settlement on March 5, 1987.

A few months later, on July 31, 1987, Konicki's health insurer, Employers Health Insurance Company, contacted Greenhalgh inquiring whether, in light of the fact that the Konickis owned two automobiles, they had in fact received all available underinsured motorist coverage from Allstate. Greenhalgh responded that, even though two cars were insured, Konicki had recovered all possible benefits from Allstate.

Three years later, in July 1990, Employers again contacted Greenhalgh attempting to ascertain whether Employers might make a claim against Allstate for additional underinsured motorist benefits. In response to this inquiry, Greenhalgh obtained, for the first time, a copy of the Allstate policy's declarations page from James Konicki and sent it to Employers.

After obtaining the information, Employers sued Allstate on July 11, 1990, for additional benefits pursuant to the underinsured motorist provisions of its policy. In its answer to Employers' complaint, Allstate raised the settlement agreement with Konicki as a bar to the action.

On May 10, 1991, Greenhalgh, who had joined in Employers' action, filed a motion under § 806.07(1)(h), STATS., to vacate the settlement. Section 806.07 lists several specific grounds upon which relief may be granted from judgments, orders or stipulations, and paragraph (h), the "catch-all" provision, gives the trial court discretion to reopen a judgment for "[a]ny other reasons justifying relief...."

The trial court granted the motion and entered an order vacating its approval of the settlement, concluding that, because Allstate's underinsured motorist coverage could be "stacked" for each of the Konickis' two automobiles ² and they were unaware of this fact, considerations of justice and equity required that they be relieved from their settlement agreement. The court confirmed the order in a judgment entered on reconsideration. The judgment awarded Konicki an additional $100,000 under the Allstate policy and added prejudgment interest of $64,734.25, accruing at the rate of twelve percent from March 5, 1987, the date the original settlement was approved. Allstate appeals from the judgment. Other facts will be referred to below.

III. REOPENING THE JUDGMENT

A. Introduction

Trial courts have "broad discretionary authority" to grant relief under § 806.07(1)(h), STATS. Mullen v. Coolong, 153 Wis.2d 401, 407, 451 N.W.2d 412, 414 (1990). Indeed, we said in Eau Claire County v. Employers Ins., 146 Wis.2d 101, 109, 430 N.W.2d 579, 582 (Ct.App.1988), that we will not overturn an order granting relief under § 806.07(1)(h) "unless there has been a clear abuse of discretion." ³

The limited scope of our review of discretionary rulings is well settled.

Generally, "[w]e will not reverse a discretionary determination by the trial court if the record shows that discretion was in fact exercised and we can perceive a reasonable basis for the court's decision." Prahl v. Brosamle, 142 Wis.2d 658, 667, 420 N.W.2d 372, 376 (Ct.App.1987). Indeed, "[b]ecause the exercise of discretion is so essential to the trial court's functioning, we generally look for reasons to sustain discretionary determinations." Schneller v. St. Mary's Hosp., 155 Wis.2d 365, 374, 455 N.W.2d 250, 254 (Ct.App.1990), aff'd, 162 Wis.2d 296, 470 N.W.2d 873 (1991).

To determine whether the trial court properly exercised its discretion in a particular matter, we look first to the court's on-the-record explanation of the reasons underlying its decision. And if that explanation indicates that the court looked to and "considered the facts of the case and reasoned its way to a conclusion that is (a) one a reasonable judge could reach and (b) consistent with applicable law, we will affirm the decision even if it is not one with which we ourselves would agree." Burkes v. Hales, 165 Wis.2d 585, 590, 478 N.W.2d 37, 39 (Ct.App.1991).

Steinbach v. Gustafson, 177 Wis.2d 178, 185-86, 502 N.W.2d 156, 159 (Ct.App.1993).

Because an appropriate exercise of discretion requires the application of correct legal principles to the facts of record, Hlavinka v. Blunt, Ellis & Loewi, Inc., 174 Wis.2d 381, 392, 497 N.W.2d 756, 760 (Ct.App.1993), a trial court erroneously exercises its discretion when its decision is based on a misapplication or erroneous view of the law. Datronic Rental Corp. v. DeSol, Inc., 164 Wis.2d 289, 292, 474 N.W.2d 780, 781 (Ct.App.1991). On this appeal, Allstate challenges the trial court's decision on both grounds: it argues that the court erroneously exercised its discretion in granting relief to the Konickis on the facts of the case and, additionally, that the decision is legally incorrect. We consider the arguments in turn.

B. Reopening on the Facts of the Case

The trial court found as a fact that the Konickis had settled with Allstate based on their understanding that $100,000 was the maximum allowable limit under the policy's underinsured motorist provisions when in fact there was $100,000 coverage on each car. As a result, the court concluded that "[t]he Konickis did not make a well[-]informed decision as to the extent of available coverage at the time of the settlement," and that "extraordinary circumstances" existed to justify relief under § 806.07(1)(h), STATS.

Where, as here, relief from a judgment or settlement is sought under the catch-all provisions of § 806.07(1)(h), STATS., based on facts that would also justify relief under specific subsections of the statute--such as those dealing with "[m]istake, inadvertence, surprise, or excusable neglect," or "[n]ewly-discovered evidence"--relief will be granted only where "extraordinary circumstances" are present. State ex rel. M.L.B. v. D.G.H., 122 Wis.2d 536, 552, 363 N.W.2d 419, 427 (1985). The M.L.B. court listed the following factors as relevant to the trial court's exercise of discretion in...