Kenneth C. Burgraff, Sr. v. Menard, Inc.
875 N.W.2d 596
Wis.2016Background
- Kenneth Burgraff was injured when a Menard employee loaded his trailer; Burgraff sued Menard. Millers First insured Burgraff's vehicle (auto policy with $100,000 per-person limit) and agreed to defend Menard as a permissive user subject to reservation of rights.
- Menard had a commercial policy with CNA that included a $500,000 self-insured retention (SIR) and excess coverage; CNA's excess attached after the SIR was eroded by losses and defense costs.
- Millers First's policy contained an "other insurance" clause allocating loss by proportion of limits and a defense clause stating the duty to defend ends when the policy's limit of liability is exhausted; it also promised to pay defense costs in addition to limits.
- At mediation Millers First settled with Burgraff for $40,000 (one-sixth of the agreed $600,000 maximum exposure), then withdrew Menard's defense; Menard did not settle and proceeded to trial, where the jury awarded less than policy limits.
- Procedural posture: circuit court granted summary judgment for Millers First on duty-to-defend after settlement and treated Menard's SIR as "other insurance;" court of appeals reversed on duty-to-defend and affirmed on SIR as other insurance; Wisconsin Supreme Court granted review.
Issues
| Issue | Menard / Plaintiff's Argument | Millers First / Defendant's Argument | Held |
|---|---|---|---|
| Whether Menard's $500,000 self-insured retention constitutes "other applicable liability insurance" under Millers First's other-insurance clause | Menard argued the SIR is not "other insurance" and therefore Millers First would be primary and Menard's SIR would operate as excess/deductible | Millers First argued the SIR should count as "other applicable liability insurance," so limits are pooled and Millers First pays one-sixth | Held: SIR is "other applicable liability insurance" (Hillegass controls; Brown County exception inapplicable) |
| Whether Millers First's duty to defend Menard ended after it settled for its proportionate share ($40,000) | Menard argued Millers First retained duty to defend until it paid its $100,000 declarated policy limit | Millers First argued settling for its proportional share exhausted its "limit of liability for this coverage" and thus ended its duty to defend | Held: Millers First breached duty to defend; duty continues until full $100,000 policy limit is paid (St. John's principle) |
| Remedies available to Menard for breach of duty to defend | Menard sought full costs and fees incurred after Millers First withdrew defense; argued not entitled to windfall but entitled to make-whole damages | Millers First argued damages should be limited/pro-rated to its proportional share (one-sixth) and credited for defense paid before withdrawal | Held: Remanded to circuit court to determine damages; Menard entitled to recover costs and attorney fees incurred after the breach, but full indemnity for the verdict was not warranted absent causal connection to the breach (Newhouse/Hamlin framework) |
| Whether Millers First may seek equitable contribution or pro rata allocation of defense costs from Menard | Menard argued Millers First should bear all post-withdrawal defense costs because insurer wrote its policy without a pro rata defense clause | Millers First (and concurrence) argued equitable contribution is appropriate to allocate defense costs among concurrent primary insurers | Held: Majority rejects applying equitable contribution here and declines to rewrite policy; concurrence would permit remand to allocate defense costs equitably between Millers First and Menard |
Key Cases Cited
- Hillegass v. Landwehr, 176 Wis. 2d 76 (1993) (self-insurance constitutes "other collectible insurance")
- Brown Cty. v. OHIC Ins. Co., 300 Wis. 2d 547 (Ct. App. 2007) (limited exception treating SIR like a deductible in dispute between self-insured entity and its own insurer)
- St. John's Home of Milwaukee v. Continental Cas. Co., 147 Wis. 2d 764 (Ct. App. 1988) (insurer must exhaust total policy limits before relieved of duty to defend)
- Newhouse by Skow v. Citizens Sec. Mut. Ins. Co., 176 Wis. 2d 824 (1993) (measure of damages for breach of duty to defend: put insured in position had insurer defended)
- Teigen v. Jelco of Wis., 124 Wis. 2d 1 (1985) (Loy releases and effect on secondary carriers)
- Loy v. Bunderson, 107 Wis. 2d 400 (1982) (Loy release principles permitting settling below limits with credit up to policy limits)
- Plastics Eng'g Co. v. Liberty Mut. Ins. Co., 315 Wis. 2d 556 (2009) (court will not rewrite policy to insert pro rata language; insurer defending the entire suit where coverage exists)
- Blasing v. Zurich Am. Ins. Co., 356 Wis. 2d 63 (2014) (permissive user doctrine under auto policies)