Case No.: |
2009AP483 |
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Complete Title of Case: |
†Petition for Review Filed. |
Opinion Filed: |
August 10, 2010 |
Submitted on Briefs: |
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Oral Argument: |
June 23, 2010 |
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JUDGES: |
Curley, P.J., Fine and Brennan, JJ. |
Concurred: |
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Dissented: |
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Appellant |
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ATTORNEYS: |
On behalf of the defendant-appellant,
the cause was submitted on the briefs of Richard E. Schmidt and Jon D. Monson of Piper &
Schmidt of |
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Respondent |
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ATTORNEYS: |
On behalf of the defendants-respondents,
the cause was submitted on the brief of Jeffrey T. Nichols and Stacy K. Luell of |
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2010 WI App 121
COURT OF APPEALS DECISION DATED AND FILED August 10, 2010 A. John Voelker Acting Clerk of Court of Appeals |
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NOTICE |
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This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports. A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See Wis. Stat. § 808.10 and Rule 809.62. |
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Appeal No. |
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STATE OF |
IN COURT OF APPEALS |
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Jake A. Kender, Plaintiff-Respondent, v. Auto-Owners Insurance Company, Defendant-Appellant, Matt E. Lucey, Enterprise Rent-A-Car Company, Inc., Empire Fire and Marine Insurance Company, United Healthcare of Wisconsin, Inc. and American Family Mutual Insurance Company, Defendants-Respondents. |
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APPEAL
from an order of the circuit court for
Before Curley, P.J., Fine and Brennan, JJ.
¶1 CURLEY, P.J. Auto-Owners Insurance
Company (Auto-Owners) appeals from the order granting Enterprise Rent-A-Car
Company, Inc. and Empire Fire & Marine Insurance Company’s (unless
otherwise specified, collectively referred to as Enterprise) motion for
declaratory judgment, whereby the trial court declared that the Auto-Owners
insurance policy issued to Strom Engineering Corporation (Strom) affords
coverage to Matt Lucey. Auto-Owners
argues that the trial court erred when it applied
I. Background.[1]
¶2 This lawsuit arises out of a motor vehicle accident that
occurred in the early morning hours of March 13, 2005, in Oak Creek, Wisconsin
and involved vehicles operated by Lucey and Jake Kender. At the time of the accident, Lucey was
driving a vehicle that Strom, his employer, had rented from
¶3 Strom is a
It is agreed:
1. SECTION II – LIABILITY COVERAGE is amended as follows:
….
a.
Liability
Coverage – Bodily Injury and Property Damage
We will pay damages for bodily injury and property damage for which you become legally responsible because of or arising out of the ownership, maintenance or use of your automobile … as an automobile. We will pay such damages:
….
(3) on behalf of any person using your automobile (that is not a trailer) with your permission or that of a relative….[[2]]
(Italics added.)
¶4 Strom moved for summary judgment on the basis that Lucey was
not acting within the scope of his employment at the time of the accident. The trial court granted the motion and
dismissed all claims against Strom.[3] At the same time, Auto-Owners moved for
bifurcation and stay and for a coverage trial on the permissive use issue based
on a factual dispute as to whether Lucey was operating the vehicle with Strom’s
permission at the time of the accident.
¶5 The trial court denied Auto-Owners’ motion and granted
II. Analysis.
¶6 Auto-Owners argues that the trial court’s decision is in
error because: (1) even if Minnesota law
applies to the permissive use question, Minnesota law is clear and unambiguous
that it does not apply outside of Minnesota’s borders; and (2) there is no
basis to apply Minnesota law because this is not a contract interpretation
question requiring the determination of policy rights. Instead, because this case involves a
Wisconsin motor vehicle accident, Auto-Owners asserts that choice-of-law
analysis dictates that
¶7 When it comes to permissive use,
A.
Minnesota’s initial permission rule.
¶8 At the outset, we address Auto-Owners’ assertion that the trial court’s application of Minnesota law was in error because Minnesota’s permissive use law comes from a Minnesota statute which cannot be applied outside of state lines. To support its argument, Auto-Owners relies on the language of Minn. Stat. § 170.54:
Driver deemed agent of owner. Whenever any motor vehicle shall be operated within this state, by any person other than the owner, with the consent of the owner, express or implied, the operator thereof shall in case of accident, be deemed the agent of the owner of such motor vehicle in the operation thereof.
(Italics added.)[4]
¶9 Auto-Owners’ reliance on the statute is misplaced. Liability under the statute is not at issue;
what is at issue is whether the Auto-Owners policy issued to Strom provides
coverage to Lucey. An owner’s liability
under the statute is separate and distinct from an insurer’s liability based on
policy language. See, e.g., Safeco Ins. Cos. v. Diaz, 385
N.W.2d 845, 847 (Minn. Ct. App. 1986) (identifying two types of potential
liability in a permissive use case:
vicarious liability under Minn.
Stat. § 170.54 and liability under an insurance policy), overruled in part on other grounds by Lobeck v. State Farm Mut. Auto. Ins. Co.,
582 N.W.2d 246 (
¶10 Auto-Owners contends that “it is obvious that the initial
permission rule and Minn. Stat.
§ 170.54 are one and the same, and are entirely inseparable.” Based on our review of the relevant case law,
we are not convinced. Instead, our
reading of these cases comports with Enterprise’s assessment that “[t]he
‘initial permission’ rule is a court made canon that has been adopted by
Minnesota courts and applied to interpret both
the statutorily imposed owner liability and
the contractual liability of an insurer.”
(Emphasis added.) See, e.g., Christensen, 658 N.W.2d at
584-85 (explaining that “[i]n construing the scope of coverage created by
omnibus clauses, courts have followed one of three rules: (1) the strict or conversion rule; (2)
the initial permission rule; or (3) the minor deviation rule” and that
¶11 Auto-Owners relies on Avis Rent-A-Car System v. Vang, 123
F. Supp. 2d 504 (D. Minn. 2000), to support its position.[6] There, the court concluded that Minn. Stat. § 170.54 did not apply
to an accident that occurred in
¶12 Instead, this case is akin to State Farm Mutual Automobile Insurance
Co. v. Budget Rent-A-Car Systems, Inc., 359 N.W.2d 673 (Minn. Ct. App.
1984), where, after applying the initial permission rule, the court concluded
that a driver was afforded coverage under an omnibus clause of an excess policy
because he was given permission to drive by the renter of the vehicle, despite
a contrary provision in the rental agreement.
¶13 Accordingly, while we agree with Auto-Owners that Minn. Stat. § 170.54 applies only
to accidents that occur within
B. Choice-of-law
analysis.
¶14 Having determined that
¶15 Case law reveals that “insurance-related issues which arise as
part of a personal injury lawsuit are not always readily categorized as
sounding in tort or contract.” Drinkwater,
290
¶16 Two leading cases discussing choice-of-law analysis are State
Farm Mutual Auto Insurance Co. v. Gillette, 2002 WI 31, 251
¶17 Gillette arose out of an action brought by Wisconsin residents
to recover underinsured motorist benefits for injuries resulting from an
accident that occurred in
¶18 At issue in Drinkwater was whether a health plan
could enforce its contractual subrogation rights to recover from the proceeds
of the plaintiff’s tort action.
¶19 The circumstances of this case are unlike those presented in Drinkwater
and in Gillette to the extent that they warranted the application of
tort choice-of-law analysis because the injured parties’ rights to recover in
tort were “tightly bound” to the rights asserted by the health plan and the
insurance company, respectively, see Drinkwater, 290 Wis. 2d 642, ¶39; see also Gillette, 251
¶20 At issue is whether Auto-Owners has contractual responsibility,
under the terms of the policy it provided to Strom, to insure Lucey. Consequently, we apply the “grouping of
contacts” rule to determine whether
¶21 Pursuant to the “‘grouping of contacts’ rule,” contract rights are
“‘determined by the law of the [jurisdiction] with which the contract has its
most significant relationship.’”
¶22 After considering the relevant contacts under the grouping of
contacts rule, we conclude that
¶23 As previously stated,
By the Court.—Order affirmed.
[1] To the extent there is a dispute as to the factual circumstances leading up to the accident, the dispute is not material for purposes of this appeal. We have tried to reference only those facts that the parties appear to agree on.
[2] The policy defines “Your automobile” as the automobile listed on the declarations page, which includes “Hired Automobiles.”
[3] The dismissal of Strom is not at issue.
[4] Minnesota Stat. § 170.54 has since been renumbered Minn. Stat. § 169.09(5a). As Auto-Owners points out, the cases relevant to this appeal were issued prior to § 170.54’s renumbering. Therefore, to avoid confusion, we refer to the statute as § 170.54.
[5] We
are aware of the recent decision in Blum v. 1st Auto & Casualty Insurance
Co., 2010 WI 78, ___ Wis. 2d ___, 786 N.W.2d 78, where our supreme
court held that when it overrules a court of appeals decision on any ground,
the entire opinion loses all precedential value, and as such cannot be cited as
authority for any point of law, unless the Wisconsin Supreme Court expressly states
otherwise.
[6] We
note that Avis Rent-A-Car System v. Vang, 123 F. Supp. 2d 504
(D. Minn. 2000), is not binding authority in
[7] Auto-Owners asserts:
Because of [Minn. Stat. § 170.54]’s limited
application, the choice of law analysis is entirely moot. Simply looking at the terms of the subject
[8] We
are not persuaded by Auto-Owners’ argument that the court’s contract
choice-of-law test set forth in State Farm Mutual Auto Insurance Co. v.
Gillette, 2002 WI 31, 251 Wis. 2d 561, 641 N.W.2d 662, is inapplicable
because Gillette involved a first-party contract claim, whereas this is
a third-party claim alleging negligence against Lucey, and as such, is a tort
claim. Thom v. OneBeacon Ins. Co.,
2007 WI App 123, ¶14 n.7, 300 Wis. 2d 607, 731 N.W.2d 657 (“Claims by third
parties are tort claims, not contract claims.”). While the underlying lawsuit is indeed a
third-party claim, the issue involved here relates solely to the contract
aspects of the insurance policy issued by Auto-Owners. As such, we see no reason to distinguish it
from the first-party contract claim at issue in Gillette. See id., 251
Furthermore, Auto-Owners’
representation that this case involves an issue of “substantive law,” i.e.,
“whether