Zarnstorff v. Neenah Creek Custom Trucking

• Decision Date: 14 October 2010
• Docket Number: No. 2009AP1321.,2009AP1321.
• Citation: 792 N.W.2d 594,2010 WI App 147,330 Wis.2d 174
• Parties: Paul A. ZARNSTORFF and Nadine B. Zarnstorff, Plaintiffs-Appellants, FN† FN† Petition for Review filed.v. NEENAH CREEK CUSTOM TRUCKING, Defendant, Acuity, A Mutual Insurance Company, Defendant-Respondent.
• Court: Wisconsin Court of Appeals

330 Wis.2d 174

792 N.W.2d 594

2010 WI App 147

Paul A. ZARNSTORFF and Nadine B. Zarnstorff, Plaintiffs-Appellants, ^FN† FN† Petition for Review filed.v. NEENAH CREEK CUSTOM TRUCKING, Defendant, Acuity, A Mutual Insurance Company, Defendant-Respondent.

No. 2009AP1321.

Court of Appeals of Wisconsin.

Submitted on Briefs June 8, 2010.

Opinion Filed Oct. 14, 2010.

On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Susan R. Tyndall of CMT Legal Group, Ltd., Waukesha, and David Rapoport of Rapoport Law Offices, P.C., Chicago.

On behalf of the defendant-respondent, the cause was submitted on the brief of Michelle D. Johnson and Arthur P. Simpson of Simpson & Deardorff, S.C., Milwaukee.

Before VERGERONT, P.J., LUNDSTEN and HIGGINBOTHAM, JJ.

VERGERONT, P.J.

¶ 1 The primary issue on this appeal is whether the auto exclusion in the commercial general liability (CGL) policy issued by Acuity, a mutual insurance company, to Neenah Creek Custom Trucking applies to exclude coverage for injuries sustained by Paul and Nadine Zarnstorff. They were injured in an accident that occurred when a Neenah Trucking employee ran across the highway after checking to see whether a tractor and the trailer it pulled (semi) could fit under the underpass. The semi was being operated by another employee. The circuit court concluded the exclusion applies. The Zarnstorffs appeal. We agree with the circuit court. We conclude that the conduct ofthe person in crossing the highway to assess the height of the underpass for the purpose of assisting the driver of the semi arises out of the use of the semi. Therefore, the conduct of that person, like that of the driver, comes within the auto exclusion of the CGL policy. For the reasons we explain in this opinion, this conclusion means that the conduct of the person crossing the highway is not an independent concurrent cause of the Zarnstorffs' injuries.

¶ 2 The Zarnstorffs also appeal the circuit court's denial of their post-verdict motion to preclude Acuity from contesting coverage under the CGL policy because it did not produce this policy in response to discovery requests or during the trial. Acuity did produce pre-trial the commercial auto policy it had issued Neenah Trucking, did not contest coverage under this policy, and paid the Zarnstorffs the available policy limit under the auto policy after a verdict was returned in the Zarnstorffs' favor. We conclude, based on the facts of this case and the arguments presented, that the circuit court did not erroneously exercise its discretion in declining to impose the requested sanction.

¶ 3 Accordingly, we affirm the circuit court's decision on motions after verdict and its final order dismissing the action upon a finding that Acuity has satisfied the Zarnstorffs' judgment against it by paying $995,000 under the auto policy.

BACKGROUND

¶ 4 The following facts are not disputed for the purposes of this appeal. Two employees of Neenah Trucking, Robert Korb and Joe Houle, loaded a log skidder onto a trailer for transport. Korb was to drive the tractor pulling the trailer on Interstate Highway I-39, a four-lane divided highway. Korb and Houle were unsure whether the semi would clear the two highway overpasses on their route, so Houle accompanied the semi in his own car to check for clearance.

¶ 5 As Korb approached one of the overpasses, heading south, he came to a near stop, blocking the right lane of highway traffic. Houle pulled off the highway beyond the overpass. He ran across two lanes of the highway to the center median to gauge whether the trailer and its load would fit under the overpass.

¶ 6 At this time the Zarnstorffs were driving southbound on the highway in the left lane, with another driver, William Wegert, in front of them in the same lane. When Wegert was approximately 300 or 400 feet from the overpass, Wegert saw Houle run across the highway to the center median. When Wegert was about 20 feet from Houle, Houle dashed back across the highway in front of Wegert. Wegert braked rapidly to avoid hitting Houle. Unaware of Houle's actions, Paul Zarnstorff braked when he saw Wegert brake, but was unable to stop fast enough to avoid rear-ending Wegert. Paul Zarnstorff sustained major injuries as a result of the collision, and Nadine Zarnstorff sustained minor injuries.

¶ 7 The Zarnstorffs filed this action against Neenah Creek and its insurer, Acuity. The first amended complaint alleged that the negligent acts of Neenah Creek, committed by its employees Korb and Houle, caused injuries to the Zarnstorffs. Korb, the complaint alleged, was negligent in stopping the vehicle where he did and in the operation of the vehicle. Houle, the complaint alleged, was negligent in failing to maintain a proper lookout, failing to yield the right of way to approaching vehicles, and impeding traffic. The Zarnstorffs sought recovery from Acuity under the commercial auto policy it had issued Neenah Trucking. Neenah Trucking did not dispute coverage. This policy has a limit of $1,000,000, of which$995,000 was available to the Zarnstorffs. The jury returned a verdict of $1,947,675.24 in damages, which was reduced to $1,558,140.19 due to Paul Zarnstorff's contributory negligence.

¶ 8 After the verdict was rendered, the Zarnstorffs learned that Acuity had also issued Neenah Creek a commercial general liability (CGL) policy. We discussmore details on this occurrence later in the opinion. For the present, it suffices to say that the Zarnstorffs and Acuity disagreed whether this policy provided coverage. Acuity, Neenah Creek, and the Zarnstorffs stipulated to the entry of an order for partial judgment and partial satisfaction of judgment pursuant to which Acuity paid the full $995,000 available under the auto policy in exchange for the Zarnstorffs' agreement not to collect the judgment balance of $563,140.19 from Neenah Creek or its employees. The stipulated order further provided that the dispute over coverage under the CGL policy for the judgment balance would be resolved in the post-trial phase of the litigation.

¶ 9 In the circuit court briefing on the CGL policy, Acuity contended the CGL policy did not provide coverage because of the exclusion for "[b]odily injury or property damage arising out of the ... use ... of any ... auto ... owned or operated by ... any insured. Use includes operation and loading or unloading." ¹ The Zarnstorffs acknowledged that this exclusion applied to Korb's conduct in operating the semi. However, they contended this exclusion did not apply to Houle's conduct in crossing the highway in front of the Wegert vehicle because that conduct was not a "use" of the semi.

¶ 10 The Zarnstorffs also argued that, whether or not the exclusion in the CGL policy applied, Acuityshould be estopped from denying coverage because it failed to produce the CGL policy before or during trial in response to discovery requests.

¶ 11 The circuit court concluded that Houle's conduct arose out of the use of the semi, and thus the auto exclusion applied. The circuit court declined to preclude Acuity from contesting coverage as a sanction. The court therefore granted Acuity's motion to limit the Zarnstorffs' recovery on the verdict to the auto policy limits.

DISCUSSION

¶ 12 On appeal the Zarnstorffs contend the circuit court erred in deciding there was no coverage under the CGL policy for Houle's conduct in crossing the highway. They assert that this policy plainly makes an initial grant of coverage and the auto exclusion does not apply because, under Lawver v. Boling, 71 Wis.2d 408, 238 N.W.2d 514 (1976), Houle's negligent conduct was an independent concurrent cause of their injuries. They acknowledge that Korb's negligent conduct in operating the vehicle is excluded.

¶ 13 Acuity responds that Houle's conduct is not an independent concurrent cause because it arose out of use of the vehicle and therefore comes within the exclusion. Acuity does not dispute that Houle's conduct comes within the CGL policy's initial grant of coverage and therefore it is covered unless an exclusion isapplicable. Acuity also does not contend that Houle's conduct was not negligent or that it was not a contributing cause of the Zarnstorffs' injuries.²

¶ 14 The Zarnstorffs also challenge the court's decision not to estop Acuity from disputing coverage as a sanction for not producing the CGL policy before or during the trial. We discuss the parties' positions on this issue in Section II of this opinion.

I. Auto Exclusion

¶ 15 Resolution of the parties' dispute over the applicability of the auto exclusion requires that we apply insurance policy language to undisputed facts. This presents a question of law, which we review de novo. Smith v. Atlantic Mut. Ins. Co., 155 Wis.2d 808, 810, 456 N.W.2d 597 (1990).

¶ 16 We begin with a discussion of Lawver, on which the Zarnstorffs rely. In Lawver, 71 Wis.2d at 410, 238 N.W.2d 514, as in this case, there was both an auto policy and a general liability policy. The accident occurred when the insured was operating a truck on his farm. Id. at 411, 238 N.W.2d 514. A rope that was tied to the back of the truck was attached to cables that were connected to a platform on which his son-in-law was working on barn repairs. Id. The rope broke and his son-in-law fell to the ground and was injured. Id. The auto policy provided coverage for damages because of " 'bodily injury ... arising out of the ownership, maintenance or use' of an automobile." Id. at 412, 238 N.W.2d 514. The general liability policy provided coverage for all amounts the insured was " 'legally obligated to pay as damages because of bodily injury,' " but did not apply "tothe ownership, maintenance, operation, use, loading or unloading of ... automobiles." Id.³

¶ 17 The auto insurer in Lawver argued that the auto policy did not provide coverage because the injury arose out of negligence in selecting materials and making the rigging and did not arise out of use of the truck. Id. at 415,...