Omnibus Statute produces odd, but not absurd, result

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A recent decision by the Wisconsin Court of Appeals looked at the Omnibus Statute as it applied to an insurance claim involving a Menards employee.

The case, Vicki L. Blasing v. Zurich American and Menards Inc., 2012 AP 858, stemmed from a Sept. 16, 2008, incident in which Blasing’s foot was struck by falling 2-by-4-inch plank boards when a Menard’s employee was loading heavy wood onto her half-ton 1990 Chevrolet pickup truck.

The appellate court found the Menards employee was covered as a “permissive user” under Blasing’s car insurance with American Family Insurance, which provided coverage “to the same extent as the policyholder,” consistent with Wisconsin Omnibus Statute section 632.32 et seq.

The appellate court acknowledged that the idea of Menards pushing its legal fees and possible liabilities onto the auto driver’s insurance company in this case may be an odd result, when it had its own commercial liability policy in effect.

“If this is a result that the legislature does not desire,” the court suggested, “it should amend the Omnibus Statute to prevent such results. We are bound by the statute …”

The incident happened at a Menards in Jefferson, Wis., where Blasing went to pick up 40 wood boards in 2008. Blasing was standing next to the rear passenger side of her pickup truck when the Menard’s employee drove up in a forklift. The employee set the wood down in the Chevy’s flatbed area, but several boards dislodged, allegedly falling hard on Blasing’s foot.

Three years later, Blasing’s lawsuit against Menards and Zurich American alleged negligent loading and care, and violation of Wisconsin’s “Safe Place” statute. However, Blasing’s auto insurance company, American Family Mutual, agreed to provide a defense for Menards, subject to reservation of right.

After the trial court ruled in favor of American Family on cross-motions for summary and declaratory judgment by both parties, Zurich American appealed.

The trial court in Jefferson County had, in part, based its ruling on the idea that the Menards employee was not technically “using” Blasing’s truck at the time of the accident. The appellate court quickly dispensed with this theory, noting that the plain language in the Omnibus Statute and caselaw guided the outcome in this case.

The general rule as stated in the Wisconsin Omnibus Statute is that “permissive users” are additional insured persons under auto policies – with coverage to the “same extent as the policyholder,” the appellate court found. The statute was created in part to ensure uniformity in policy coverage for all permissive users of a policyholder’s vehicle.

Additionally, the appellate court described that it must give the Omnibus Statute its “common, ordinary and accepted meaning. If the meaning of the statute is unambiguous, we apply that meaning.”

The court noted that Wis. Stat. section 632.32(2)(h) also defines the word “using” to include “driving, operating, manipulating, riding in and any other use.”

To better define the word “use,” the appellate court looked to Lawver v. Boling, 71 Wis. 2d 408, a seminal 1976 case where a rope and pulley system attached to a truck injured a homeowner during a wood delivery. The Lawver court established a test which states that the determination of coverage can “usually” be made by determining if the alleged “use” is consistent with the inherent nature of the vehicle; the insurance policy should be read to further the insured’s “reasonable expectation of coverage.”

The court noted that earlier court decisions in Allstate Insurance Co. v. Truck Insurance Exchanges, 63 Wis. 2d (1974), Austin-White v. Young, 2005 Wis. App. 52, and other caselaw supported the proposition that loading and unloading a vehicle fall within the permissive “use” category.

American Family asserted that the Lawver test is consistent with its own position, in that it includes certain permissive language where use of the word “usually” leaves room for exception to the stated “use” test.

With such an exception in mind, the customary Lawver test cannot be applied here, according to American Family, because to do so would create absurd results.

“Any business where employees come into contact with customers [would be] entitled to free liability insurance,” said American Family, “courtesy of the customers themselves, for injuries arising out of employees negligent acts.”

American Family speculated that this could lead to absurd situations where auto policies have to cover an electronics store employee who drops a TV on the customer’s foot, or for a furniture store employee who drops a couch on a customer.

Ultimately, the court found American Family’s assertion that routine contract interpretation here produced an “absurd result” was unsupported by the facts and the law.

The appellate court agreed that “our Supreme Court has repeatedly said that a statute should not be construed as to work an absurd result even when language seems clear and unambiguous.”

However, the court explained that such was not the case here. “It may seem odd, but does not rise to the level of unreasonable or absurd,” the court stated.

“Policyholders understand that their interests sometimes diverge from interests of [the insurance company]”, the court explained. “And a policyholder generally understands that his or her own insurance company may provide a defense to parties with interests adverse to [their own].”

Ultimately, “what is left of American Family’s absurdity argument is simply an abstract idea that it is unfair or unexpected that an injured policyholder … would face an attorney supplied by her own insurance company,” the court concluded, “and any eventual payout might come from her insurer.”

The appellate court reversed and remanded the case for further proceedings consistent with its ruling.