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Insurer can contest coverage issue

Hon. Margaret Vergeront

Hon. Margaret Vergeront

An insurance company is not barred from contesting coverage under a policy, even if the policy wasn’t disclosed pursuant to a request during discovery.

Absent a finding of egregiousness, the Wisconsin Court of Appeals held on Oct. 14 that such a severe sanction would be improper.

An automobile accident occurred on Interstate 39, substantially caused by Joe Houle, an employee of Neenah Creek Custom Trucking, who exited the truck to see if it and the trailer would be able to fit underneath an underpass.

Paul and Nadine Zarnstorff were injured as a result, and brought suit against Neenah Trucking and its insurer, Acuity.

During discovery, the Zarnstorffs requested, from Neenah Trucking, any insurance policies that may provide coverage for the accident. Neenah Trucking produced an automobile policy with Acuity, but not a commercial general liability (CGL) policy it also had with Acuity.

The jury returned a verdict of nearly $2 million in favor of the Zarnstorffs. Afterwards, The Zarnstorffs learned of the CGL policy. Post-trial, the parties argued whether the CGL policy covered the incident, and whether Acuity was precluded from contesting coverage for failing to produce the policy before or during trial.

The circuit court held that the policy did not provide coverage, and that Acuity was not precluded contesting coverage. The Zarnstorffs appealed, but the Court of Appeals affirmed in an opinion by Judge Margaret Vergeront.


The court first held that the CGL policy did not provide coverage, because the policy had an exclusion for injuries caused through the use of an automobile.

The court found two conflicting opinions from the Wisconsin Supreme Court on the issue. In Saunders v. National Dairy Products Corp., 39 Wis.2d 575, 159 N.W.2d 603 (1968), the court held that, where a truck driver fell on ice while walking towards a loading dock, the injury was not incurred while using the vehicle.

But in Lawver v. Boling, 71 Wis.2d 408, 238 N.W.2d 514 (1976), the court held that where a truck was used to repair a barn, the injury was incurred while using the vehicle.

Because Lawver was decided after Saunders, the Court of Appeals concluded that its broader definition of “use” applied, and therefore, the employee’s conduct in checking the underpass constituted “use” of the truck.


The court then held that the circuit court properly declined to sanction Acuity for not disclosing the CGL policy during discovery, by precluding it from denying coverage under it.

First, the court noted that Acuity did not refuse to provide a defense, but did provide coverage under the automobile policy.

Thus, Acuity’s conduct could not be considered egregious, a prerequisite for a sanction that severe.

In addition, the discovery requests were directed to Neenah Trucking, rather than Acuity. The court acknowledged that the same attorneys represented both, but concluded that the discovery statutes cannot be construed to authorize sanctions on a party other than the party who was served and responded to the discovery requests.

Finally, the court found that there was no prejudice, because the CGL policy excluded coverage.

“If the Zarnstorffs had learned of the existence of this policy from discovery responses, the same procedure would have occurred pre-trial as occurred after the verdict,” the court found. “The parties would have briefed the issue and the court would have decided as a matter of law whether the auto exclusion applied to Houle’s conduct. The court decided the policy did not apply, and we have affirmed that.”


It would have been anomalous if Acuity had been precluded from denying coverage under its CGL policy. The whole reason for a business to get both automobile policies and a CGL policy with an automobile exclusion, is so that, no matter what happens, it is covered by one of the policies, but not the other.

Nevertheless, the case offers lessons for preventing the mishap in this case, and deciding which policy applies before trial, rather than after.

Michelle Johnson, of Simpson & Deardorff SC, who represented Acuity postverdict, but not during trial, said that when she handles a case at the trial level, she always requests all policies from the insurer at the beginning of the case.

Johnson also said that, in this case, the complaint and discovery requests specifically referenced the automobile policy, but not the CGL policy, rather than generally alleging that the defendant was insured by Acuity.

In most cases, Johnson said, the type of policy is not referenced in the complaint.

By wording the complaint in this way, Johnson said, “the defense attorney could be led to believe the plaintiff was only looking for the auto policy.”

What the Court Held

Case: Zarnstorff v. Neenah Creek Custom Trucking, No. 2009AP1321

Issues: Is checking an underpass to see if a vehicle will fit under it “use” of the vehicle?

Should an insurer be precluded from contesting coverage under a policy as a sanction for not disclosing it during discovery?

Holdings: Yes. Checking an underpass is use of a vehicle.

No. The insurer tendered a defense under another policy, so the conduct was not egregious.

Attorneys: For Plaintiffs: Susan R. Tyndall, Waukesha; For Defendants: James G. Curtis, Jr., La Crosse; Arthur P. Simpson, Michelle D. Johnson, Milwaukee

David Ziemer can be reached at david.ziemer@wislawjournal.com.

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