Losing complaint in mail is excusable neglect

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The Wisconsin Supreme Court issued a wide-ranging opinion Tuesday, addressing excusable neglect, the direct action statute and the liability of corporate officers for negligence.

In sum, the court held: losing a complaint in the mail may be excusable neglect allowing a defendant to file an answer late; a foreign insurer can be sued under the direct action statute where the injury occurs in Wisconsin; and corporate officers are not immune from personal liability for negligence occurring during the course of their business duties.

Nevertheless, the court held that, in this case, public policy considerations precluded suit against the officer involved.

The case was the result of a 2003 incident, in which five people were injured when their minivan, driven by Bryan Casper, was struck from behind while stopped at an intersection. The driver of the other vehicle, Mark Wearing, was a truck driver who was found to be under the influence of oxycodone, diazepam and nordiazepam at the time of the accident.

Casper and the other passengers brought suit against a total of 14 defendants.

Excusable neglect

One defendant, National Union Fire Insurance Co., did not respond within 45 days after receiving Casper’s fifth amended complaint.

Six days after receiving Casper’s motion for default judgment, National Union filed an answer and a motion for enlargement of time in which to answer. The circuit court granted the motion, and the Court of Appeals affirmed, as did the Supreme Court.

Based on affidavits submitted by National Union, the court found that the insurer had developed written procedures for handling complaints, and that its procedures had previously worked well.

The court warned that “glib claims that attribute fault to the United States Postal Service” should be viewed with skepticism. But it held it could not reject such a possibility out-of-hand.

Because the first four complaints against National Union were answered in a timely fashion, National Union processes thousands of complaints per year, “a few inadvertent mishaps are bound to occur” in processing those complaints, and National Union promptly filed an answer after the motion for default judgment was filed, the court held it was not an abuse of discretion for the circuit court to find that its failure to file a timely answer was excusable neglect.

Direct action

The court next reversed the dismissal of the direct action claim against National Union, overruling the opinion in Kenison v. Wellington Insurance Co., 218 Wis.2d 700, 582 N.W.2d 69 (Ct.App.1998).

National Union argued that sec. 631.01(1) only permits direct action on policies delivered or issued for delivery in Wisconsin, relying on the opinion in Kenison.

But the court concluded that the legislature’s use of the disjunctive “or” in the statute permits suit whenever any of the four alternatives are met, including when a policy covers “business operations in this state.”

The legislative history indicates the statute was amended in 1967 for the purpose of allowing direct action “where the policy is issued or delivered outside Wisconsin, if the accident occurs in the state.”

Based on the language of the statute and the legislative history, the court overruled Kenison and concluded that, provided the accident, injury, or negligence occurs in Wisconsin, direct action is allowed under the statute.

Personal liability

Third, the court held that corporate officers are not immune from suit for negligence committed in the course of their business.

Among the defendants was Jeffrey Wenham, a salesman who approved the route Wearing was taking when the accident occurred. Casper alleged that Wenham was negligent for approving a trip that could not be driven within the hours of service requirements of the Federal Motor Carrier Safety Regulations.

Wenham argued that, as a corporate officer, he could only be liable for intentional torts, but the court disagreed.

In Oxmans’ Erwin Meat Co. v. Blacketer, 86 Wis.2d 683, 273 N.W.2d 285 (1979), the court held that a corporate agent is not shielded from personal liability for torts, even if the corporation may also be liable.

Wenham asked the court to limit the holding in Oxmans’ to intentional torts, which were the basis for the suit in that case. Wenham argued that Oxmans’ does not apply, where the suit alleges only negligence by an officer acting in the scope of his duties for a solvent and insured company.

But the court disagreed, saying, “We decline to hold that corporate officers may never be held personally liable for negligent acts committed in the scope of their corporate duties.”

Public policy

Nevertheless, the court held that public policy considerations precluded liability against Wenham in this case, because the injury was too remote from the alleged negligence.

Justice David Prosser wrote for the court, “Wenham did not hire Wearing. He did not train Wearing. He did not supervise Wearing. In fact, he never met the man driving the truck that collided with the Caspers’ vehicle that day in May. Any negligence on Wenham’s part was remote from the Caspers’ injury in terms of time, distance, and cause.”

The court added that Wearing was under the influence of medication at the time, something Wenham could not have foreseen.

But Justice Ann Walsh Bradley dissented from this last part of the opinion, joined by Chief Justice Shirley Abrahamson.

The partial dissent found that Wearing’s use of pain medications was not unforeseeable, because his fatigue and back pain could be deemed to stem from driving an illegal route that could not be completed within federal safety standards, which Wenham approved.

The dissent said that, on this record, factual questions remain and decision on public policy grounds is premature.

What the Court Held

Case:   Casper v. American International South Insurance Co., Nos. 2006AP1229, 2006AP2512 & 2007AP369.

Issues: Is a defendant’s losing a complaint in the mail not excusable neglect as a matter of law?

Can an insurer be sued under the direct action statute, when it did not issue or deliver a policy in Wisconsin?

Can a corporate officer be sued for negligence in performing his duties for a solvent and insured corporation?

Holdings:        No. While the assertion should be treated with skepticism, it is not an abuse of discretion to find excusable neglect for failing to file a timely answer.

Yes. If an injury occurs in Wisconsin, the insurer may be sued directly.

Yes. Personal liability for an officer’s torts is not limited to intentional torts.

Attorneys:       For Plaintiffs: Monte E. Weiss, Charles W. Kramer, Milwaukee; For Defendants: Larry J. Britton, Shannon M. Trevithick, Milwaukee.

David Ziemer can be reached at [email protected]