Whirlpool Corp. v. Ziebert
| Citation | 197 Wis.2d 144,539 N.W.2d 883 |
| Decision Date | 16 November 1995 |
| Docket Number | No. 93-3307,93-3307 |
| Parties | , 64 USLW 2343 WHIRLPOOL CORPORATION, a foreign corporation, Plaintiff-Respondent-Petitioner, v. Sharon ZIEBERT, Defendant-Petitioner. d ALLSTATE INSURANCE COMPANY, a foreign insurance company, Defendant-Third Party Plaintiff-Appellant, v. Jaclyn ZIEBERT, Third Party Defendant-Intervenor-Respondent, Kenneth Ziebert, Metropolitan Life Insurance Company and Blain Supply, Inc., Third Party Defendants. |
| Court | United States State Supreme Court of Wisconsin |
For the plaintiff-respondent-petitioner there were briefs by J. Ric Gass, Mark M. Leitner and Kravit Gass & Weber, S.C., Milwaukee, and oral argument by Mark M. Leitner.
For the defendant-petitioner there were briefs by Diane Loftus and F. William Russo & Associates, Milwaukee, and oral argument by Gordon K. Aaron of Alex, Aaron & Goldman, S.C., Milwaukee.
For the defendant-third party plaintiff-appellant, there was a brief by Robert J. Lauer, Christine M. Benson and Kasdorf, Lewis & Swietlik, S.C., Milwaukee, and oral argument by Robert J. Lauer.
Amicus curiae brief was filed by Timothy J. Strattner, Linda Vogt Meagher and Schellinger & Doyle, S.C., Brookfield, for the Civil Trial Counsel of Wisconsin and the Wisconsin Insurance Alliance.
Amicus curiae brief was filed by D.J. Weiss and Habush, Habush, Davis & Rottier, S.C., Rhinelander, for the Wisconsin Academy of Trial Lawyers.
The issue before this court is whether a family member exclusion clause in a homeowner's insurance policy can bar coverage for a third party contribution action brought against an insured. We hold that family member exclusion clauses which apply to contribution claims against an insured are not contrary to public policy.
Jaclyn Ziebert, at the age of three, injured her hand in a meat grinder allegedly manufactured by Whirlpool Corporation (Whirlpool) and sold by Blain Supply, Inc. (Blain). Jaclyn, along with her parents, Kenneth and Sharon Ziebert, and their health insurer, Metropolitan Life Insurance Company, filed an action against Whirlpool and Blain in Milwaukee County Circuit Court to recover damages for Jaclyn's injuries. This appeal arises from a separate contribution action filed by Whirlpool against Sharon Ziebert and her homeowner's liability insurer, Allstate Insurance Company (Allstate), wherein Whirlpool alleges that Jaclyn's injuries were caused by Sharon Ziebert's negligent supervision.
Allstate moved for summary judgment in the contribution action, arguing that the family exclusion clause found in Sharon Ziebert's policy released it from any obligation to provide coverage to Sharon. The Milwaukee County Circuit Court, Louise M. Tesmer, Judge, denied the motion, but the court of appeals reversed and granted summary judgment in Allstate's favor. The court of appeals found that the family exclusion clause in question unambiguously included contribution claims such as the one brought by Whirlpool against Sharon. See Whirlpool Corp. v. Ziebert, 188 Wis.2d 453, 456-57, 525 N.W.2d 128, 129-30 (1994). We find the conclusion reached by the court of appeals correct and affirm its decision.
This court will consider two questions in reaching this decision. The first, which has broader significance, is whether family exclusion clauses which apply to indirect claims, such as a contribution action, are contrary to public policy. Second, we must determine if the specific language of the family exclusion clause in this case includes contribution claims.
The first question involves issues of public policy and contract enforcement. When answering such questions, this court is mindful that the freedom to contract has long been protected in this state. See Journal/Sentinel, Inc. v. Pleva, 155 Wis.2d 704, 710, 456 N.W.2d 359, 362 (1990); Watts v. Watts, 137 Wis.2d 506, 521, 405 N.W.2d 303, 309 (1987). Although a court may question the validity of a contract on the grounds of public policy, this measure is extreme and should only be exercised in cases free from doubt. See Continental Ins. Co. v. Daily Express, Inc., 68 Wis.2d 581, 589, 229 N.W.2d 617, 621 (1975). It is under these standards that we determine whether or not family exclusion clauses which relate to third party contribution claims are valid.
This is not the first time a question regarding family exclusion clauses has been before this court. In Shannon v. Shannon, 150 Wis.2d 434, 456, 442 N.W.2d 25, 35 (1989) we found that:
Homeowner's insurance policies often cover liability for injury to third persons. These same policies frequently exclude coverage for liability to 'residents' of the household.... The purpose has been explained so 'as to exempt the insurer from liability to those persons to whom the insured, on account of close family ties, would be apt to be partial in case of injury.' ... Thus, the exclusion protects insurers from situations where an insured might not completely cooperate and assist an insurance company's administration of the case.
Quoting A.G., Waite v. Travelers Ins. Co., 112 Wis.2d 18, 20-21, 331 N.W.2d 643, 644 (Ct.App.1983) (citations omitted). We then specifically held that "such exclusions serve a legitimate purpose and are not contrary to public policy." Id. Shannon, however, only dealt with a direct suit against an insured family member. The question of whether a family exclusion clause may also reach to contribution claims by a third party was not before us. This is, therefore, a question of first impression for this court.
The underlying concern in Shannon was the possibility of family member collusion in intra-family lawsuits. Because of the gravity of this concern, we did not require in Shannon that either party actually prove collusion on a case-by-case basis. Instead, this court assumed collusion in all cases, thereby finding that family exclusion clauses covering direct actions are not contrary to public policy. 1 The question is, then, whether such clauses should be allowed to also encompass indirect actions such as contribution claims. Most courts which have addressed this question have concluded that they should. See Groff v. State Farm Fire and Cas. Co., 646 F.Supp. 973, 975 (E.D.Pa.1986); Chrysler Credit Corp. v. United Services Auto. Ass'n, 625 So.2d 69, 73 (Fla.App.1993); Utley v. Allstate Ins. Co., 19 Cal.App.4th 815, 24 Cal.Rptr.2d 1, 4-5 (1993); State Farm Fire and Cas. Co. v. Ondracek, 173 Ill.App.3d 581, 123 Ill.Dec. 251, 253, 527 N.E.2d 889, 891 (1988); Parker v. State Farm Mut. Auto. Ins. Co., 263 Md. 206, 282 A.2d 503, 508-09 (Ct.App.1971). We agree.
Ultimately, the reasoning supporting Shannon, collusion in intra-family lawsuits, is just as persuasive when applied to contribution claims. A real-world hypothetical demonstrates the possibility of collusion in indirect claims quite clearly. If Whirlpool did not have the financial resources to meet Jaclyn's judgment, a contribution claim against Sharon and Allstate may be the only source of funds. In such a situation, Sharon may be more concerned with her daughter receiving compensation for her injuries than with cooperating fully with Allstate. Furthermore, it is unlikely that Sharon would defend herself with as much zeal as she would if her own assets were at stake. 2 The Eastern District Court of Pennsylvania, when faced with a similar question, correctly recognized that "[t]he potential for collusion is virtually the same in either situation [direct suits against family members or third party contribution claims against family members]--at least in the sense that ... the parents would have no incentive to defeat or reduce the claim." Groff, 646 F.Supp. at 975.
It must be noted that our decision does not imply any wrongdoing on the part of the Zieberts. In fact, the possibility of collusion in this case seems quite low, if not nil. 3 However, although this court never ignores the circumstances of a particular case, there are times when we must look beyond the immediate facts to principles of public policy and the broader ramifications that our decisions have on the people of this state as a whole. We are persuaded that the possibility of collusion is great enough to warrant allowing family exclusion clauses to cover contribution actions. Therefore, we hold that such clauses are not contrary to public policy, even though there may be no collusion in this particular case.
The next issue is whether or not the language of this specific family exclusion clause encompasses contribution actions. Construction of an insurance policy is a question of law which this court reviews de novo. See Lambert v. Wrensch, 135 Wis.2d 105, 115, 399 N.W.2d 369, 373-74 (1987). Insurance contracts are subject to the same rules of construction as other contracts. See Ehlers v. Colonial Penn. Ins. Co., 81 Wis.2d 64, 74, 259 N.W.2d 718, 723 (1977).
The first step in such analysis is, of course, to examine the language of the policy itself. It is fundamental in Wisconsin that "ambiguities in coverage are to be construed in favor of coverage, while exclusions are narrowly construed against the insurer." Smith v. Atlantic Mut. Ins. Co., 155 Wis.2d 808, 811, 456 N.W.2d 597, 598 (1990); see also Davison v. Wilson, 71 Wis.2d 630, 635-36, 239 N.W.2d 38, 41 (1976). This rule of strict construction, however, is not applicable if the policy is unambiguous. See, e.g., Bertler v. Employers Insurance of Wausau, 86 Wis.2d 13, 17, 271 N.W.2d 603, 605 (1978); D'Angelo v. Cornell Paperboard Products Co., 59 Wis.2d 46, 49, 207 N.W.2d 846, 848 (1973); Leatherman v. American Family Mut. Ins. Co., 52 Wis.2d 644, 650, 190 N.W.2d 904, 907 (1971). Furthermore, the principle of construing exclusions narrowly does not allow a court to completely eviscerate an exclusion which is clear from the face of the policy. Rules of construction cannot be used to rewrite the clear and precise language of a contract. See Gonzalez v. City of Franklin, 137 Wis.2d 109, 122, ...
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