Kenneth C. Burgraff, Sr. and Linda Burgraff, Plaintiffs-Respondents,
Menard, Inc., Defendant-Appellant-Cross Petitioner, Millers First Insurance Company, Defendant-Respondent-Petitioner, Walmart Stores, Inc., Associates Health and Welfare Plan, Defendant
Oral Argument September 17, 2015.
[Copyrighted Material Omitted]
REVIEW OF A DECISION OF THE COURT OF APPEALS. COURT: Circuit. COUNTY: Eau Claire. JUDGE: Michael A. Schumacher. (L.C. No. 2011CV270). (Reported at 2014 WI App 85, 356 Wis.2d 282, 853 N.W.2d 574). (Ct.App. 2014 -- Published). PDC No. 2014 WI App 85.
For the defendant-respondent-petitioner, there were briefs by John C. Possi and Mueller, Goss & Possi, S.C., Milwaukee, and oral argument by John C. Possi.
For the defendant-appellant-cross-petitioner, there were briefs by Jeffrey S. Fertl, and Hinshaw & Culbertson LLP, Milwaukee, and oral argument by Jeffrey S. Fertl.
ANN WALSH BRADLEY, J. CONCUR & DISSENT: ROGGENSACK, C.J., ZIEGLER, J., concur and dissent. NOT PARTICIPATING: GABLEMAN, R.G.BRADLEY, J.J., did not participate.
ANN WALSH BRADLEY, J.
[367 Wis.2d 56] [¶1] Petitioner, Millers First Insurance Company (" Millers First" ), seeks review of a published decision of the court of appeals that reversed the circuit court's order for summary judgment. The circuit court determined that Millers First no longer had a continuing duty to defend Menard after the plaintiff, Kenneth Burgraff (" Burgraff" ), reached a settlement with Millers First for its proportionate share of the plaintiff's claim. In reversing, the court of appeals concluded that Millers First had a continuing duty to defend and that it breached the duty when it withdrew its defense of Menard following the Burgraff settlement.
[¶2] Millers First argues that its " limits of liability for this coverage" were exhausted when it settled with Burgraff for $40,000 because that amount represented its maximum proportional liability for Burgraff's claim. Once it satisfied its proportionate share of Burgraff's claim, Millers First contends it had no further duty to defend Menard even though it had not paid its full $100,000 limit of liability.
[¶3] We conclude, under the terms of the policy, Millers First was required to provide a defense for Menard until it paid its $100,000 limit of liability. Like the court of appeals, we determine that Millers [367 Wis.2d 57] First breached its duty to defend when it withdrew its defense of Menard following the settlement with Burgraff.
[¶4] Cross-petitioner, Menard, Inc., seeks review of that part of the court of appeals opinion that affirmed a judgment of the circuit court determining that Menard's $500,000 self-insured retention qualified as " other applicable liability insurance" under the Millers First policy's " other insurance" clause. The court of appeals concluded that Menard's self-insured retention was " other insurance" pursuant to this court's decision in Hillegass v. Landwehr, 176 Wis.2d 76, 499 N.W.2d 652 (1993).
[¶5] Menard argues that its self-insured retention does not constitute " other insurance" under the Millers First policy's " other applicable liability insurance" clause. It contends that because it is a permissive user of Burgraff's vehicle, this case involves a dispute between a self-insured party and its own insurer and is governed by Brown County v. OHIC Ins. Co., 2007 WI App 46, 300 Wis.2d 547, 730 N.W.2d 446,
¶ 5 We agree with the court of appeals that Hillegass, and not Brown County, controls the outcome of this case. Like the court of appeals, we determine that Menard's self-insured retention is " other applicable liability insurance" under the
Millers First policy's " other insurance clause."
[¶6] Accordingly, we affirm the Court of Appeals and remand to the circuit court for a determination of damages.
[¶7] The relevant facts of this case are not in dispute. Kenneth Burgraff was injured when a Menard [367 Wis.2d 58] employee loaded materials onto Burgraff's trailer using a forklift. Burgraff sued Menard for damages.
[¶8] Burgraff's vehicle and trailer were insured under an automobile insurance policy issued by Millers First. The declaration page provides for a $100,000 per person bodily injury liability limit. Its insuring agreement states:
We will pay damages for " bodily injury" or " property damage" for which any " insured" becomes legally responsible because of an auto accident. Damages include prejudgment interest awarded against the " insured." We will settle or defend, as we consider appropriate, any claim or suit asking for these damages.
[¶9] The insuring agreement also addresses Millers First's duty to defend:
In addition to our limit of liability, we will pay all defense costs we incur. Our duty to settle or defend ends when our limit of liability for this coverage has been exhausted. We are not obligated to provide defense after we have paid our limits of liability in settlement of claims or suits. We have no duty to defend any suit or settle any claim for " bodily injury" or " property damage" not covered under this policy.
[¶10] Further, the Millers First policy contains the following " other insurance" clause:
If there is other applicable liability insurance, we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits. However, any insurance we provide for a vehicle you do not own shall be excess over any other collectible insurance.
[¶11] Menard contended that it was entitled to coverage under the Millers First policy as a permissive [367 Wis.2d 59] user of Burgraff's vehicle and tendered defense of Burgraff's claim to Millers First. See Blasing v. Zurich Am. Ins. Co., 2014 WI 73, 356 Wis.2d 63, 850 N.W.2d 138. Millers First agreed to defend Menard subject to a reservation of rights, but later conceded that it had a duty to defend, agreeing that Menard was entitled to coverage under Burgraff's automobile policy.
[¶12] Menard was also insured for excess coverage under a commercial general liability policy issued by CNA. The excess policy had a liability limit of $500,000. CNA's policy contained an " other insurance" clause that provides:
4. Other Insurance
If other valid and collectible insurance is available to the insured for a loss we cover under Coverages A or B of this Coverage Part, our obligations are limited as follows:
. . .
b. Excess Insurance
(1) This insurance is excess over:
(a) Any of the other insurance, whether primary, excess, contingent or on any other basis:
. . .
(iv) If the loss arises out of the maintenance or use of aircraft, " autos" or watercraft . . .
(3) When this insurance is excess over other insurance, we will pay only our share of the amount of the loss, if any, that exceeds the sum of:
(a) The total amount that such other insurance would pay for the loss in the absence of this insurance; and
[367 Wis.2d 60] (b) The total of all deductible and self-insured amounts under all that other insurance.
. . .
c. Method of Sharing
If all of the other insurance permits contribution by equal shares, we will follow this method also. Under this approach each insurer contributes equal amounts until it has paid its applicable limit of insurance or none of the loss remains, whichever comes first.
If any of the other insurance does not permit contribution by equal shares, we will contribute by limits. Under this method, each insurer's share is based on the ratio of its applicable limit of insurance to the total applicable limits of insurance of all insurers.
[¶13] CNA's policy also includes a self-insured retention endorsement as follows:
In consideration of the premium charged, it is agreed that the limits of insurance for  the coverages provided by this policy . . . will apply excess of a self-insured retention (hereinafter referred to as the Retention Amount)[.]
[¶14] The " retention amount" is $500,000 per occurrence. Under the self-insured retention endorsement, Menard is required to pay the first $500,000 worth of damages and defense costs arising from an occurrence.
[¶15] Millers First moved for partial summary judgment on the grounds that Menard's $500,000 self-insured retention qualified as " other applicable liability insurance" under the Millers First policy's " other insurance" clause. It asked the circuit court to declare that under the " other insurance" clause, Millers [367 Wis.2d 61] First's share of any verdict or settlement would be one-sixth of the total $600,000 liability limits of the two policies combined. This amount represents the Millers First policy's $100,000 limit of liability added to Menard's $500,000 self-insured retention amount. The circuit court granted Millers First's motion.
[¶16] During mediation, Millers First settled Burgraff's claim for $40,000. The settlement agreement between Burgraff and Millers First agreed to " fully discharge Miller First Insurance Company and one-sixth of any liability that Menard, Inc. may have to  Burgraff." Menard did not settle with Burgraff at mediation.
[¶17] Subsequently, Millers First moved for summary judgment on the grounds that it no longer had a duty to defend Menard because it had fully satisfied its duty to pay one-sixth of any verdict or settlement. Again, the circuit court granted Millers First's motion.
[¶18] Menard moved to bifurcate and stay the trial on the merits of Burgraff's claim pending resolution of the coverage issues on appeal. Millers First took no position on Menard's motion to bifurcate and stay. The circuit court denied Menard's motion and the case proceeded to trial.
[¶19] On appeal, Menard argued: (1) its self-insured retention was not " other insurance," and (2) Millers First had a continuing duty to defend [367 Wis.2d 62] Menard because
Millers First settled with the plaintiff for less than its $100,000 limit of liability. The court of appeals affirmed the circuit court's determination that Menard's self-insured retention was " other insurance" and reversed the circuit court's determination that Menard no longer had a duty to defend. Burgraff v. Menard, Inc., 2014 WI App 85,
¶¶ 2-3, 356 Wis.2d 282, 853 N.W.2d 574.
[¶20] In this case we are asked to review the circuit court's grant of summary judgment. We review grants of summary judgment independently, applying the same methodology employed by the circuit court. Belding v. Demoulin, 2014 WI 8,
¶ 13, 352 Wis.2d 359, 843 N.W.2d 373. Summary judgment is appropriate if " there is no genuine issue as to any material fact and  the moving party is entitled to judgment as a matter of law." Wis. Stat. § 802.08(2) (2013-2014).
[¶21] Here there is no genuine issue of material fact. Therefore, we focus on the terms of the parties' insurance policies, which are contracts for insurance. Construction of an insurance policy presents a question of law, which we review independently of the determinations rendered by the circuit court and the court of appeals. Folkman v. Quamme, 2003 WI 116,
¶ 12, 264 Wis.2d 617, 665 N.W.2d 857.
[¶22] This court follows the well-established rules of insurance contract interpretation. Insurance [367 Wis.2d 63] policies are interpreted as they would be by a reasonable person in the position of the insured. State Farm Mut. Auto. Ins. Co. v. Gillette, 2002 WI 31,
¶ 28, 251 Wis.2d 561, 641 N.W.2d 662. " [B]ecause the insurer is in a position to write its insurance contracts with the exact language it chooses--so long as the language conforms to statutory and administrative law--ambiguity in that language is construed in favor of an insured seeking coverage." Froedtert Mem'l Lutheran Hosp. v. Nat'l States Ins., 2009 WI 33,
¶ 43, 317 Wis.2d 54, 765 N.W.2d 251; see also First Am. Title Ins. Co. v. Dahlmann, 2006 WI 65,
¶ 41, 291 Wis.2d 156, 715 N.W.2d 609.
[¶23] We address first the argument raised by Menard's cross-petition because it is foundational to our subsequent discussion. Menard contends that the court of appeals erred when it determined that Menard's self-insured retention qualifies as " other applicable liability insurance" under the Millers First policy's " other insurance" clause.
[¶24] A self-insured retention obligates the insured to pay the first level of loss before excess insurance coverage is applied to the claim. Menard's CNA insurance policy consisted of a self-insured retention of $500,000, with an additional $500,000 in excess coverage provided by CNA.
[¶25] If Menard's self-insured retention is not " other applicable liability insurance," then it would be treated as excess coverage--not primary coverage. Thus, Menard asserts that Millers First's $100,000 [367 Wis.2d 64] limit of liability would have to be exhausted before Menard had any responsibility to pay Burgraff's claim.
[¶26] As is the case here, an insured may have more than one insurance policy that provides coverage for the same risk. Coverage is either primary or excess. Primary
insurance coverage provides " first-dollar" coverage up to the policy's limit of liability. See Arnold P. Anderson, Wisconsin Insurance Law § 11.12 (7th Ed. 2015). Excess insurance coverage attaches only after a predetermined amount of primary insurance coverage has been exhausted. Id. at § 11.14.
[¶27] " Whenever two policies apply to the same insured at the same time, the issue of which policy must pay first--or which is primary and which is excess--is dealt with by 'other insurance' clauses." Id. at § 11.3. Wis. Stat. § 631.43(1) governs other insurance provisions:
When 2 or more policies promise to indemnify an insured against the same loss . . . . The policies may by their terms define the extent to which each is primary and each excess, but if the policies contain inconsistent terms on that point, the insurers shall be jointly and severally liable to the insured on any coverage ...