Teske v. Wilson Mut. Ins. Co.

• Decision Date: 04 June 2019
• Docket Number: No. 2017AP1269,2017AP1269
• Citation: 2019 WI 62,387 Wis.2d 213,928 N.W.2d 555
• Parties: John TESKE, Julie A. Teske, Katherine Teske and Elle Teske, Plaintiffs-Appellants, United HealthCare Insurance Company, Subrogated Party-Plaintiff, v. WILSON MUTUAL INSURANCE COMPANY, Defendant-Respondent-Petitioner.
• Court: Wisconsin Supreme Court

387 Wis.2d 213

928 N.W.2d 555

2019 WI 62

John TESKE, Julie A. Teske, Katherine Teske and Elle Teske, Plaintiffs-Appellants,United HealthCare Insurance Company, Subrogated Party-Plaintiff,

v.WILSON MUTUAL INSURANCE COMPANY, Defendant-Respondent-Petitioner.

No. 2017AP1269

Supreme Court of Wisconsin.

Oral Argument: March 18, 2019

Opinion Filed: June 4, 2019

For the defendant-respondent-petitioner, there were briefs filed by Corrado Cirillo and Olsen, Kloet, Gunderson & Conway, Sheboygan. There was an oral argument by Corrado Cirillo.

For the plaintiffs-appellants, there was a brief filed by Keith E. Trower and Warshafsky, Rotter, Tarnoff & Bloch, S.C., Milwaukee. There was an oral argument by Keith E. Trower.

ANN WALSH BRADLEY, J.

¶1 The petitioner, Wilson Mutual Insurance Company (Wilson), seeks review of an unpublished decision of the court of appeals reversing the circuit court's order that determined the Teskes' claims were barred by the doctrine of claim preclusion.¹ Wilson contends that the circuit court correctly dismissed the Teskes' claims because the claims could have been brought in a prior action between the same parties.

¶2 Specifically, Wilson asserts that claim preclusion applies to bar all of the plaintiffs' claims because all three elements of claim preclusion are established. It contends that the parties to the first and second actions were the same, or were in privity. Wilson argues next that identity of causes of action is present because the claims in this lawsuit and the previous lawsuit arose from the same common nucleus of operative facts. Finally, it advances that there was a final judgment on the merits in the first action.

¶3 We conclude that claim preclusion bars the claims brought by Julie, Katherine, and Elle Teske in this second action. Accordingly, we reverse that part of the decision of the court of appeals that allowed their claims to proceed. However, we are evenly divided as to whether claim preclusion bars the claims brought by John Teske. As a result, we affirm the court of appeals' decision that allowed John's claims to proceed.²

I

¶4 This case arises from a car accident in Fond du Lac County on November 24, 2013. The underlying facts of the accident are undisputed.

¶5 Emily Teske was driving a vehicle in which her mother, Julie, and two sisters, Katherine and Elle, were passengers. John Teske, Julie's husband and Emily, Katherine and Elle's father, was not in the car. Julie, Emily, Katherine, and Elle were all seriously injured after their vehicle was rear-ended by a car driven by Sabrina Srock. The force of the collision propelled the Teskes' car into the oncoming lane, where it struck a vehicle driven by Patrice Rog, who was also injured.

¶6 Srock carried an automobile insurance policy with State Farm that provided a policy limit of $100,000 per person and $ 300,000 per accident. The Teskes carried a policy with Wilson, which as relevant here contained underinsured motorist (UIM) coverage with a policy limit of $ 500,000 per person, per accident. Importantly, the Wilson policy also incorporated a "reducing clause" which "permits a setoff from the insured's UIM coverage [in] the amount paid to the insured by the underinsured tortfeasor."³

¶7 The accident resulted in two separate lawsuits. In the first action, Julie Teske brought a negligence claim against Srock and her insurer, State Farm, in Milwaukee County circuit court.⁴ Katherine and Elle were also named as plaintiffs, although as minors they were represented by a guardian ad litem.

¶8 Pursuant to a minor settlement agreement,⁵ the parties settled the lawsuit and agreed how the money from the various insurers would be split. State Farm tendered its $300,000 policy limit, but the amount was insufficient to cover the full medical expenses incurred by Rog and the Teskes. The amount was ultimately split between the Teskes and Rog, with the Teskes receiving $ 255,000 and Rog receiving $45,000.

¶9 Applying the policy's reducing clause, Wilson agreed to pay the Teskes $245,000. It arrived at this amount by beginning with its $500,000 UIM policy limit and subtracting the $255,000 the Teskes received from State Farm.

¶10 Each member of the Teske family received proceeds from the insurance settlement as set forth in the minor settlement agreement. Specifically, Julie received $264,000, Katherine received $40,000, Elle and Emily received $35,000 each, and John received $20,000.

¶11 Also incorporated into the minor settlement agreement was a "Pierringer Release."⁶ Pursuant to the Pierringer Release, the Teskes released all of their claims against Srock and State Farm. The Teskes partially released Wilson to the extent of the $245,000 it paid. However, they explicitly "reserved the right to pursue further claims for UIM benefits against [Wilson] and [Wilson] has not waived any defenses to such future claims." The minor settlement agreement was signed by each member of the Teske family,⁷ as well as a representative of Wilson, and approved by the circuit court.

¶12 After releasing Srock and State Farm, Julie, Katherine, and Elle amended their complaint and added Wilson as a defendant. At issue in this amended declaratory action was whether the reducing clause in the Wilson policy was properly applied. Venue was transferred to Sheboygan County, and the Sheboygan County circuit court⁸ determined that the reducing clause was unambiguous, valid, and applicable. Julie, Katherine, and Elle appealed and the court of appeals affirmed. Teske ex rel. Harding v. Wilson Mut. Ins. Co. (Teske I ), No. 2015AP208, unpublished slip op., 365 Wis. 2d 196, 2015 WL 4924138 (Wis. Ct. App. Aug. 19, 2015). The same three Teskes petitioned for review, which this court denied, thus ending the first action.

¶13 Following the resolution of the first action, John, Julie, Katherine, and Elle brought this second lawsuit. They alleged that Emily, as the driver at the time of the accident, was negligent in the operation of the Teske vehicle. However, they sued Wilson directly as Emily's insurer pursuant to Wisconsin's direct action statute.⁹

¶14 Moving for summary judgment, Wilson argued that the Teskes' negligence action was barred by the doctrine of claim preclusion. Focusing on the first two elements of claim preclusion, identity of parties and identity of causes of action, it asserted that there was identity between the parties in both lawsuits. It based this argument on the observation that Wilson, Julie, Katherine and Elle were all named plaintiffs in the first action. Wilson also observed that although John was not formally named a party in the first action, he participated and received proceeds from the minor settlement agreement.

¶15 Wilson also contended that there was identity between the causes of action in both lawsuits. Specifically, it argued that the actions arose from a single event—the November 24, 2013 accident.¹⁰

¶16 The circuit court agreed with Wilson and granted the motion for summary judgment. It determined that "there is no dispute as to the technical identity between the parties given the captions and pleadings of the suits and the involvement of the parties in the litigation and the minor settlement and executing documents and such."

¶17 Additionally, the circuit court concluded that there was an identity of the causes of action in the first and second lawsuits, explaining: "The methodology or the phraseology refers to a concept of a transaction which has a natural grouping of a common nucleus of operative facts, and here the facts are all consistent about the horrific accident on November 24th, 2013, on Highway 23 near Mount Calvary." Finally, it determined that a final judgment on the merits had been reached. Accordingly, the circuit court concluded that claim preclusion barred the second action.

¶18 The Teskes appealed, and the court of appeals reversed. Teske v. Wilson Mut. Ins. Co. (Teske II ), No. 2017AP1269, unpublished slip op., 382 Wis. 2d 832, 2018 WL 2138651 (Wis. Ct. App. May 9, 2018). Contrary to the circuit court, the court of appeals determined that claim preclusion did not bar the second action. It reasoned that "[t]he current tort action involves litigation of different facts and legal theories, specifically the facts of the accident versus the interpretation of whether the reducing clause in Wilson's policy applied." Id., ¶ 9. As opposed to the first action, which "was a contract action ... requir[ing] the court to interpret Wilson's UIM policy provisions[,]" the second action "will examine Emily's alleged negligence and, if any, whether her negligence was a cause of the Teskes' injuries." Id.

¶19 Accordingly, the court of appeals concluded that "[t]he two actions involve neither a common ‘nucleus of facts’ nor legal question." Id. Thus in the court of appeals' view, "there is no requirement in law or equity requiring these distinctly separate claims to be litigated together." Id.

II

¶20 We are asked to review the court of appeals' decision concluding that claim preclusion does not bar the Teskes' second action. Whether claim preclusion applies under a given factual scenario is a question of law we review independently of the determinations rendered by the circuit court and court of appeals. Federal Nat'l Mortg. Ass'n v. Thompson, 2018 WI 57, ¶ 28, 381 Wis. 2d 609, 912 N.W.2d 364.

¶21 This question arises in the context of a motion for summary judgment. We similarly review a summary judgment determination independently, without deference to the circuit court or court of appeals. Shugarts v. Mohr, 2018 WI 27, ¶ 17, 380 Wis. 2d 512, 909 N.W.2d 402. Summary judgment is appropriate where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Id.

III

¶22 To determine whether claim preclusion bars this second action, we address each of the three elements of claim preclusion with respect to the facts of this case.

¶23 "The doctrine of claim preclusion provides that a final judgment...