Whirlpool Corporation v. Sharon ZiebertAnnotate this Case
NOTICE This opinion is subject to further editing and modification. The final version will appear in the bound volume of the official reports. No. 93-3307 STATE OF WISCONSIN : IN SUPREME COURT Whirlpool Corporation, a foreign corporation, FILED Plaintiff-Respondent-Petitioner, NOV 16, 1995 \ v. Sharon Ziebert, Marilyn L. Graves Clerk of Supreme Court Defendant-Petitioner, Madison, WI Allstate Insurance Company, a foreign insurance company, Defendant-Third Party PlaintiffAppellant, v. Jaclyn Ziebert, Third Party Defendant-IntervenorRespondent, Kenneth Ziebert, Metropolitan Life Insurance Company and Blain Supply, Inc., Third Party Defendants. REVIEW of a decision of the Court of Appeals. DONALD W. STEINMETZ, J. whether a family member Affirmed. The issue before this court is exclusion clause in a homeowner's No. 93-3307 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 (Whirlpool) and sold by Blain Supply, Inc. (Blain). Corporation 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 coverage to Sharon. Tesmer, Judge, it from any obligation to provide The Milwaukee County Circuit Court, Louise M. denied the motion, but the court of appeals reversed and granted summary judgment in Allstate's favor. court of appeals found that the family exclusion clause The 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). 2 No. 93-3307 We find the conclusion reached by the court of appeals correct and affirm its decision. This court decision. will consider two questions in reaching this 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 contract enforcement. involves issues of public policy and 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 305, 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). standards that we determine whether or It is under these not family exclusion clauses which relate to third party contribution claims are valid. This is not the first time a question exclusion clauses has been before this court. regarding family 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 3 No. 93-3307 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. 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 1 We do not find convincing Whirlpool's argument that the standard "cooperation clause" in most insurance policies adequately protects insurance companies from collusion. This argument was implicitly rejected in Shannon where the policy in question also contained such a cooperation clause. Furthermore, it is certainly not contrary to public policy for a party to bargain for multiple contractual protections. 4 No. 93-3307 contribution claims. Most courts which question have concluded that they should. have addressed this 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., 24 Cal. Rptr. 2d 1, 4-5 (Cal. App. 1993); State Farm Fire and Cas. Co. v. Ondracek, 527 N.E.2d 889, 891 (Ill. App. 1988); Parker v. State Farm Mut. Auto Ins. Co., 282 A.2d 503, 508-09 (Md. Ct. App. 1971). We agree. Ultimately, the reasoning supporting Shannon, collusion in intra-family lawsuits, contribution claims. is just as persuasive when applied to 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. concerned with her In such a situation, Sharon may be more daughter receiving compensation injuries than with cooperating fully with Allstate. for her Furthermore, it is unlikely that Sharon would defend herself with as much zeal as she would if her own assets were at stake.2 District Court of Pennsylvania, when faced with The Eastern a similar question, correctly recognized that "[t]he potential for collusion is virtually the same in either situation [direct suits against 2 The insured's defense of his or her actions, of course, would be central to the determination of any such contribution claim. 5 No. 93-3307 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 wrongdoing on the part of the Zieberts. does not imply In fact, the possibility of collusion in this case seems quite low, if not nil.3 although this court never ignores any the However, 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. not contrary to Therefore, we hold that such clauses are 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 3 There are a number of factors which support Sharon's claim that there is no collusion in this case. These include: Sharon has her own claim against Whirlpool which would be diminished by any finding of negligence on her part; her policy limit may be quite low in relation to the injuries suffered by Jaclyn; and Sharon has retained her own counsel throughout these proceedings to represent her interests. 6 No. 93-3307 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 insurer." Smith v. Atlantic Mut. Ins. construed against the 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). construction, however, unambiguous. is not This rule of strict applicable if the policy is 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). of construing exclusions narrowly Furthermore, the principle 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, 403 N.W.2d 747, 752 (1987); In re Marriage of Levy v. Levy, 130 Wis. 2d 523, 533, 388 N.W.2d 170, 174-75 (1986); Limpert v. Smith, 56 Wis. 2d 632, 640, 203 N.W.2d 7 No. 93-3307 29, 33-34 (1973); Meyer v. City of Amery, 185 Wis. 2d 537, 543, 518 N.W.2d 296, 298 (Ct. App. 1994). In this case the family exclusion clause in question, even when construed narrowly, is unambiguous and clearly contemplates contribution claims. It states: "We do not cover bodily injury to an insured person ... whenever any benefit of this coverage would accrue directly or indirectly to an insured person."4 A close reading of the policy language reveals that the key phrase is: "whenever any benefit of this coverage would accrue directly or indirectly to an insured person." (emphasis added). The term "direct" is defined as: shortest course; without "[i]mmediate; proximate; by the circuity; operating by an immediate connection or relation, instead of operating through a medium; the opposite of indirect." Black's Law Dictionary 459 (6th ed. 1990). A "direct" benefit, therefore, would accrue to Jaclyn Ziebert by way of a "direct" claim against Sharon Ziebert and Allstate. It is undisputed that Allstate would not be required to cover this type of action. The term "indirect" is defined as: "[n]ot direct in relation or connection; not having an immediate bearing or application; not Dictionary 773. related in the natural way." Black's Law An indirect benefit would incur to Jaclyn if 4 It is undisputed that Kenneth, Sharon and Jaclyn Ziebert are all "insured persons" under the Allstate policy. The policy defines an "insured person" as: You and, if a resident of your household: a) any relative; and b) any dependent person in your care. 8 No. 93-3307 Whirlpool won its contribution claim since the money Whirlpool receives will, in all practical respects, be funneled through to Jaclyn. Jaclyn would receive, in the plainest sense of the word, an indirect benefit. If possible, a court should interpret a contract so that all parts are given meaning. See Stanhope v. Brown County, 90 Wis. 2d 823, 848-49, 280 N.W.2d 711 (1979). policy in the above direct/indirect differentiate manner benefit between can this language two Only by interpreting the be was possible accomplished. obviously types of The meant benefits to and to clarify the policy language to ensure that contribution claims were included in the scope of the clause. Appeals confronted identical language, The California Court of albeit context, and reached the same conclusion. in a different See State Farm Mut. Auto. Ins. Co. v. Vaughn, 208 Cal. Rptr. 601 (Cal. App. 1984). In California, to a statute had authorized automobile insurers exclude from coverage "liability for bodily injury to an insured." Cal. Ins. amended Code this §11580.1(5)(c) section to (1982). exclude from The legislature coverage "liability then for bodily injury to an insured ... whenever the ultimate benefits of that indemnification accrue directly or indirectly to an insured." Cal. Ins. Code §11580.1(5)(c). The California Court of Appeals specifically held that the additional language clarified the scope of the original language so that it was more clearly understood that contribution claims would be covered by the clause. 9 It No. 93-3307 stated that the amendment was necessary to make clear "that there is no duty to indemnify an insured named in a cross-complaint where there would be no duty to indemnify if the insured were sued directly." Vaughn, 208 Cal. Rptr. at 603. The reasoning of the Vaughn court was sound. We are not contribution claim persuaded is not by a Whirlpool's bodily argument injury and that therefore covered under the language of the exclusion clause. a not Although Whirlpool is correct in asserting that we have scrupulously found that a claim for contribution is distinct from the underlying cause of action--State Farm Mut. Automobile Ins. Co. v. Schara, 56 Wis. 2d 262, 266-67, 201 N.W.2d 758, 760 (1972); Johnson v. Heintz, 73 Wis. 2d 286, 243 N.W.2d 815, 822-23 (1976); Schara and its progeny stand for the principle that a contribution claim based in tort should be treated no differently than one based in contract. asserts See Schara, 56 Wis. 2d at 266-67. or implies that a claim separate from the underlying claim. for This in no way contribution is wholly In fact, contribution claims are dependent and stem from the original action; without it they would not exist at all. The liability being asserted in Whirlpool's contribution claim against Sharon Ziebert is based on the claim for damages suffered by Jaclyn Ziebert. That liability is identical whether there is a direct claim against Sharon Ziebert by her daughter or whether the claim is indirectly asserted through a contribution 10 No. 93-3307 claim by Whirlpool. benefit because her To say that Jaclyn Ziebert is not receiving a recovery comes from a contribution claim rather than a direct claim for personal injuries is the ultimate tribute to form over substance. Such a conclusion defies both logic and common sense. The decision of the court of appeals enforces the public policy of avoiding potential collusion between family household members. language See Shannon, 150 Wis. 2d at 456. of encompasses the policy contribution is clear claims, and Furthermore, the unambiguous and, as such, and clearly legitimately precludes coverage to Sharon Ziebert. By the Court. The decision affirmed. 11 of the court of appeals is No. 93-3307 SUPREME COURT OF WISCONSIN Case No.: Complete Title of Case: Whirlpool 93-3307 Corporation, a foreign corporation, Plaintiff-Respondent-Petitioner, v. Sharon Ziebert, Defendant-Petitioner, 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. __________________________________________ REVIEW OF A DECISION OF THE COURT OF APPEALS Reported at: 188 Wis. 2d 453, 525 N.W.2d 128 (Ct. App. 1994) PUBLISHED Opinion Filed: November 16, Submitted on Briefs: Oral Argument: October 5, 1995 Source of APPEAL COURT: Circuit COUNTY: Milwaukee JUDGE: LOUISE TESMER JUSTICES: Concurred: Dissented: Not Participating: 1995 No. 93-3307 93-3307 Whirlpool Corporation v. Ziebert 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. ATTORNEYS: 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.