Sukala v. Heritage Mut. Ins. Co.

• Decision Date: 22 June 2005
• Docket Number: No. 2003AP173.,2003AP173.
• Parties: Dawn SUKALA and John Sukala, Plaintiffs-Appellants, v. HERITAGE MUTUAL INSURANCE COMPANY and Western National Mutual Insurance Company, Defendants-Respondents-Petitioners.
• Court: Wisconsin Supreme Court

282 Wis.2d 46

2005 WI 83

698 N.W.2d 610

Dawn SUKALA and John Sukala, Plaintiffs-Appellants, v. HERITAGE MUTUAL INSURANCE COMPANY and Western National Mutual Insurance Company, Defendants-Respondents-Petitioners.

No. 2003AP173.

Supreme Court of Wisconsin.

Oral argument February 2, 2005.

Decided June 22, 2005.

For the defendant-respondent-petitioner, Heritage Mutual Insurance Company, there were briefs by Arthur P. Simpson, Michelle D. Wehnes and Simpson & Deardorff, S.C., Milwaukee, and oral argument by Arthur P. Simpson.

For the defendant-respondent-petitioner, Western National Mutual Insurance Company, there were briefs by Nadine I. Davy and Anderson, O'Brien, Bertz, Skrenes & Golla, Stevens Point, and oral argument by Nadine I. Davy.

For the plaintiffs-appellants there were briefs by D. James Weis and Habush Habush & Rottier, S.C., Rhinelander, and Virginia M. Antoine and Habush Habush & Rottier, S.C., Milwaukee, and oral argument by Dana J. Weis.

A joint amicus curiae brief was filed by Beth Ermatinger Hanan and Gass Weber Mullins LLC, Milwaukee, on behalf of Wisconsin Insurance Alliance and Civil Trial Counsel of Wisconsin.

¶ 1. PATIENCE DRAKE ROGGENSACK, J.

Heritage Mutual Insurance Company (Heritage) and Western National Mutual Insurance Company (Western) seek review of a court of appeals decision reversing the circuit court's¹ denial of relief from judgment to Dawn and John Sukala under Wis. Stat. § 806.07(1)(h) (2001-02).² We conclude that the circuit court correctly determined that there had been no change in the law in regard to the enforceability of the reducing clauses at issue here. Therefore, because a change in the law was the basis for the Sukalas' motion, the circuit court appropriately exercised its discretion in denying the Sukalas relief from judgment. Accordingly, we reverse the court of appeals.

I. BACKGROUND

¶ 2. On October 2, 1996, automobiles operated by John Sukala and Bruce Hasenohrl were involved in an accident that caused serious injuries to Sukala. The accident occurred during the course of Sukala's employment, and he received $786,000.18 in workers' compensation benefits from a policy issued by Heritage to his employer. The Sukalas also received $100,000 from Hasenohrl's automobile liability insurance, the limits of that policy.

¶ 3. The Sukalas sought additional recovery from two underinsured motorist (UIM) provisions, one in the Sukalas' personal automobile policy issued by Western with coverage limits of $250,000, and the other in a Heritage policy held by John Sukala's employer with $1,000,000 limits. Both UIM policies contained reducing clauses to lower the UIM limits by payments received from liability insurance and workers' compensation benefits.³

¶ 4. In February 1997, the Sukalas sued Heritage, as both Hasenohrl's insurer and the UIM insurer for John Sukala's employer, and Western, as the Sukalas' UIM insurer. The Sukalas moved to invalidate the Heritage and Western UIM reducing clauses and to declare Wis. Stat. § 632.32(5)(i)⁴ unconstitutional, because it permits reducing clauses in automobile insurance policies. The circuit court concluded that the reducing clauses were enforceable and § 632.32(5)(i) was constitutional. The Sukalas appealed, and while the case was pending before the court of appeals, this court decided Dowhower v. West Bend Mutual Insurance Co., 2000 WI 73, 236 Wis. 2d 113, 613 N.W.2d 557. There we held that § 632.32(5)(i) was constitutional and that a "reducing clause may be ambiguous within the context of the insurance contract." Dowhower, 236 Wis. 2d 113, ¶¶ 35-36. The court of appeals affirmed the circuit court's ruling against the Sukalas, Sukala v. Heritage Mutual Insurance Co., 2000 WI App 266, ¶ 20, 240 Wis. 2d 65, 622 N.W.2d 457 (Sukala I), and we denied the Sukalas' petition for review.

¶ 5. Seven months after we denied the Sukalas' petition for review, we granted review in Badger Mutual Insurance Co. v. Schmitz, 2002 WI 98, 255 Wis. 2d 61, 647 N.W.2d 223. We decided Schmitz in July 2002, stating that a reviewing court must examine a reducing clause in the context of the entire policy to determine whether the reducing clause is ambiguous. Id., ¶ 49. If the reducing clause, in the context of the entire policy, is misleading or unclear, it is ambiguous and not enforceable. Id. We also referred to the court of appeals decision in Sukala I, stating, "[i]n essence, we agree with [the court's] analysis," but that the court "proceeded to an ambiguous and misleading conclusion." Schmitz, 255 Wis. 2d 61, ¶ 42. The conclusion in Sukala I to which we referred in Schmitz was:

[U]nder Dowhower and the declared public policy of the legislature in Wis. Stat. § 632.32(5)(i), UIM reducing clauses complying with § 632.32(5)(i) cannot render UIM coverage "illusory." Once we have concluded that the UIM provisions of a policy are unambiguous, as we have here, then our inquiry is at an end.

Id. (quoting Sukala I, 240 Wis. 2d 65, ¶ 20). In Schmitz, we explained:

[T]he Sukala court shifted terms, moving from the reducing clause to "the UIM provisions of the policy," although the two could easily be read as one and the same. A policy in which all "the UIM provisions" are unambiguous is different from a policy in which only the reducing clause is unambiguous. In any event, the concluding sentence implies that once the reducing clause is found to be unambiguous, the inquiry is at an end. That is incorrect because Dowhower contemplates consideration of the entire policy.

Schmitz, 255 Wis. 2d 61, ¶ 42 (emphasis in original).

¶ 6. On June 22, 2001, while Schmitz was pending before the court of appeals, the Sukalas and Western entered into a "Release of All Claims and Hold Harmless Agreement" releasing Western from liability concerning John Sukala's accident in exchange for a payment from Western. On July 3, 2001, the Sukalas, Heritage and Western stipulated to the dismissal of the Sukalas' claims against the insurance companies.

¶ 7. On October 21, 2002, the Sukalas moved for relief from all judgments, orders, releases and stipulations from the case under Wis. Stat. § 806.07(1)(h). The circuit court denied the motion. On appeal, the court of appeals reversed the circuit court's order. Sukala v. Heritage Mut. Ins. Co., 2004 WI App 128, ¶ 14, 275 Wis. 2d 469, 685 N.W.2d 809 (Sukala II). We granted Heritage's and Western's petitions for review.

II. DISCUSSION

A. Standard of Review

¶ 8. Whether to grant relief from judgment under Wis. Stat. § 806.07(1)(h) is a decision within the discretion of the circuit court. Franke v. Franke, 2004 WI 8, ¶ 54, 268 Wis. 2d 360, 674 N.W.2d 832. A circuit court's discretionary decision will not be reversed unless the court erroneously exercised its discretion. Schwochert v. American Family Mut. Ins. Co., 172 Wis. 2d 628, 630, 494 N.W.2d 201 (1993). A discretionary decision contemplates a process of reasoning that depends on facts that are in the record, or reasonably derived by inference from facts of record, and a conclusion based on the application of the correct legal standard. State ex rel. Cynthia M.S. v. Michael F.C., 181 Wis. 2d 618, 624, 511 N.W.2d 868 (1994). "We 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." Brown v. Mosser Lee Co., 164 Wis. 2d 612, 617, 476 N.W.2d 294 (Ct. App. 1991) (citation omitted). "`[B]ecause the exercise of discretion is so essential to the trial court's functioning, we generally look for reasons to sustain discretionary determinations.'" Allstate Ins. Co. v. Konicki, 186 Wis. 2d 140, 149, 519 N.W.2d 723 (Ct. App. 1994) (quoting Schneller v. St. Mary's Hosp., 155 Wis. 2d 365, 374, 455 N.W.2d 250 (Ct. App. 1990), aff'd, 162 Wis. 2d 296, 470 N.W.2d 873 (1991)).

B. Wisconsin Stat. § 806.07

¶ 9. Wisconsin Stat. § 806.07⁵ grants courts power to relieve parties from judgments, orders and stipulations. Paragraphs 806.07(1)(a)-(g) permit relief for specific circumstances, and paragraph 806.07(1)(h) is a "catch-all" provision allowing relief from judgment for "any other reasons justifying relief." Paragraph (1)(h) "gives the trial court broad discretionary authority and invokes the pure equity power of the court." Mullen v. Coolong, 153 Wis. 2d 401, 407, 451 N.W.2d 412 (1990) (Mullen II). However, the provision permits reopening of judgments based on subsequent changes in the law only in very limited circumstances, Brown, 164 Wis. 2d at 616, and only if the motion is made within a reasonable time, id. at 618.

¶ 10. To determine whether a party is entitled to review under Wis. Stat. § 806.07(1)(h), the circuit court should examine the allegations accompanying the motion with the assumption that all assertions contained therein are true. State ex rel. M.L.B. v. D.G.H., 122 Wis. 2d 536, 553, 363 N.W.2d 419 (1985). If the facts alleged are extraordinary or unique such that relief may be warranted under paragraph (1)(h), a hearing will be held on the truth or falsity of the allegations. Id. After determining the truth of the allegations and upon consideration of any other factors bearing upon the equities of the case, the circuit court exercises its discretion to decide what relief, if any, should be granted. Id.

¶ 11. In exercising its discretion by determining whether it should grant relief from the judgment or stipulation, the circuit court should consider whether unique or extraordinary facts exist that are relevant to the competing interests of finality of judgments and relief from unjust judgments. M.L.B., 122 Wis. 2d at 552. We have explained that examination to include:

whether the judgment was the result of the conscientious, deliberate and well-informed choice of the claimant; whether the claimant received the effective assistance of counsel; whether relief is sought from a judgment in which there has been no judicial consideration of the

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