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Romero v. West Bend Mutual Insurance Co.

Court of Appeals of Wisconsin, District II

July 13, 2016

Benjamin Romero and Maria Guallpo, Plaintiffs,
v.
West Bend Mutual Insurance Company and Badger State Auto Auction, Inc., Defendants-Respondents, Addison Insurance Company, Defendant-Appellant, Ford Motor Company and TJL Properties, LLC, Defendants. Kyle S. Witz, Plaintiff,
v.
West Bend Mutual Insurance Company and Badger State Auto Auction, Inc., Defendants-Respondents, Ford Motor Company, Defendant, Addison Insurance Company, Defendant-Appellant. George Kucharas and Lynn Kucharas, Plaintiffs,
v.
West Bend Mutual Insurance Company and Badger State Auto Auction, Inc., Defendants-Respondents, Addison Insurance Company, Defendant-Appellant, Ford Motor Company, Blue Cross Blue Shield of Wisconsin, American Family Mutual Insurance Company and Dairyland Insurance Company, Defendants.

         Appeal from a judgment of the circuit court for Fond du lac County Nos. 2011CV879, 2011CV897, 2012CV1, DALE L. ENGLISH, Judge.

          Before Reilly, P.J., Gundrum and Hagedorn, JJ.

          HAGEDORN, J.

         ¶1 This case is an insurance dispute between Addison Insurance Company and West Bend Mutual Insurance Company. The dispute arose when an employee of Badger State Auto Auction, Inc. (BSAA) injured the plaintiffs while driving a vehicle it was preparing to auction off for Fairview Auto, Inc. Addison insures Fairview and West Bend insures BSAA.

         ¶2 The primary issue is whether Fairview's policy with Addison covered the accident. The circuit court concluded it did, resting in part on the conclusion that the BSAA driver was acting as Fairview's agent at the time of the accident. We reverse and conclude that the BSAA driver was not acting as Fairview's agent. Accordingly, Addison's policy did not cover the accident.

         I. BACKGROUND

         ¶3 This case comes before us on summary judgment; the material facts are not in dispute.

         Fairview, BSAA, and the Accident

         ¶4 Fairview is a corporation owned and operated by Jeffrey Boe. Fairview's entire business consists of buying vehicles at auctions and selling them at other auctions for a profit. Fairview has long used BSAA to sell its cars. At the time of the accident, Fairview had a policy with Addison, and BSAA had a policy with West Bend.

         ¶5 On August 22, 2011, Fairview purchased a 2002 Ford Explorer from an auction in Schofield, Wisconsin. Fairview then arranged for the Explorer to be sold at BSAA's August 25, 2011 auction. Fairview had control over certain parts of the auction process, but most policies and procedures were dictated by BSAA. Regarding the sale itself, Fairview could instruct BSAA whether the vehicle was being sold "as is" or as "auction guaranteed." Instead of giving BSAA a minimum price, Boe would usually stand at the auction block and inform the auctioneer whether to sell the vehicle or not.

         ¶6 BSAA, as part of its normal services, drove the Ford Explorer from Fairview's place of business to BSAA's auction. At the auction house, BSAA would assign each vehicle a parking spot and a lane to travel in. BSAA also offered services such as detailing and repairing vehicles. Once a vehicle was on BSAA's auction site, potential buyers could request a test drive. When the auction began, a BSAA driver would retrieve the vehicle from its designated spot and follow a route designated by BSAA into the auction house where the auction would be conducted. Fairview had no input, supervision, or control over the hiring or training of drivers, the particular routes used inside the auction house, the safety procedures employed by BSAA drivers, or the management of foot traffic in the auction house.

         ¶7 On August 25, 2011, BSAA employee Francis Yeager was driving vehicles for that day's auction. He was the person tasked with driving Fairview's Ford Explorer into the auction house. While doing so, he struck plaintiff Benjamin Romero. Romero suffered severe injuries that resulted in the amputation of his right leg and part of his left hand. According to the complaints, plaintiffs George Kucharas and Kyle Witz also suffered injuries. At the time of the accident, Boe was inside the auction house waiting for his vehicles to enter so that he could take his place next to the auctioneer.

         Addison's Policy

         ¶8 Addison's policy provided primary liability insurance for any covered auto[1] Fairview owned. It contained both a Garage Coverage Form and a Wisconsin-specific endorsement, the Wisconsin Changes Endorsement.

         ¶9 The Garage Coverage Form provides the default coverage under Addison's policy and applies unless modified by the Endorsement. It defines "Who Is An Insured" to include the policyholder and, with several exceptions, "[a]nyone else while using with your permission a covered 'auto' you own, hire or borrow." One of the exceptions to coverage is "[s]omeone using a covered 'auto' while he or she is working in a business of selling, servicing, repairing, parking or storing 'autos' unless that business is your 'garage operations.'"

         ¶10 The Endorsement reads: "THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY." The Endorsement states that "[f]or a covered 'auto' licensed or principally garaged in, or 'garage operations' conducted in, Wisconsin, the coverage form is changed as follows." The original policy language remained operative "unless modified by the endorsement."

         ¶11 The Endorsement provided in pertinent part:

A. Changes In Liability Coverage
….
2. If your business is selling, servicing, repairing or parking "autos", Who Is An Insured is changed to include anyone other than an officer, agent or "employee" of such business while using a covered "auto." However, that person is an "insured" only if he or she has no other valid and collectible insurance with at least the applicable minimum limit specified by Wis.Stat. [§]344.01(2)(am)….
….
3. The following is added to Who Is An Insured:
Anyone else is an "insured" while using a covered "auto" you own with your or any adult "family member's" permission.[2]

         The Litigation

         ¶12 Following the accident, Romero, Kucharas, and Witz each filed separate personal injury lawsuits stemming from their injuries. The three cases were consolidated into a single case for discovery and trial. Romero's claim was mediated and the parties eventually settled his claim for $5 million. Addison was kept informed of the settlement negotiations and refused to contribute to the settlement. West Bend paid the settlement and acquired Yeager and BSAA's rights under Fairview's policy with Addison.

         ¶13 West Bend then filed a cross-claim against Addison asserting that Yeager was an insured under Addison's policy. West Bend also maintained that Addison's policy was primary and that Addison breached its duty to indemnify by refusing to contribute to the settlement. Because of this alleged breach, West Bend claimed that it was entitled to reimbursement of $1 million-the limits of Addison's policy-plus the costs and attorneys' fees incurred in pursuing the claim against ...


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