Estate of Otto v. Physicians Insurance Co. of Wisconsin, Inc.

Rеpresentative Personal of Dale Otto, Estate Shelley Shelley Ashley Otto, Otto and Otto, Plaintiffs-Respondents,

Amanda Otto,

v. Company Physicians Wisconsin, Inc., Insurance Defendant-Appellant-Petitioner,† J. M.D., L. Terrance Witt, Charles Folkestad, - System Mayo Red Clinic Health M.D., Cedar Compensation Patients Fund, and Wisconsin Defendants, Inc. Valley Health Plan, Nebraska, Blue & Blue Shield of Cross Subrogated Defendants.

Supreme Court 15, argument April No. 2006AP1566. Oral July —Decided 2008WI (Also 805.) reported in 751 N.W.2d J., Gableman, † Motion for reconsideration denied 9/8/08. participate. did not defendant-appellant-petitioner

For the there were by Sicklen, Wilde, briefs Michael B. Van Bree Grossi Foley argument LLP, and & Lardner Madison, oral and by Michael B. Van Sicklen. plaintiffs-respondents

For the was a there brief filed by Haag, Cates, Luebke, John L. Michael J. Eric J. Gingras, Straka, Heath P. Luebke, S.C., and Cates & argument by oral Madison, and P. Heath Straka.

An amicus curiae brief was filed James Fried- A. Godfrey man, Stadler, Kahn, S.C., Katherine & Madison, on behalf of the Wisconsin Insurance Alliance Casualty Property Insurers Association of America.

An amicus curiae brief was filed Linda V. Meagher Rottier, S.C., and Habush Habush & Wauke- sha, on behalf the Wisconsin Association for Justice.

¶ 1. ABRAHAMSON, SHIRLEY S. C.J. The defen- Physicians Company dant, Wisconsin, Insurance Inc. (PIC), published seeks review of a decision of the court appeals. purposes For review, of this the court of appeals judgment by affirmed a default rendered the County, Circuit for Smeltzer, Court Dunn Rod W Judge,1 against damages by plaintiffs PIC for suffered Shelley Ashley Otto, Otto, Otto, Amanda and Estate the (collectively, plaintiff) Dale of Otto the as a result 1 Wis., Inc., Physicians Estate Otto v. Ins. Co. WI of of App 192, 198, 2d 305 Wis. 738 N.W.2d 599. malpractice

alleged in- of PIC's codefendant medical appeals. of court of We affirm the decision the sureds. analysis ¶ 2. Our is as follows: begin by stating in the what not at I. We issue present case. presented. issue

II. We state the explore the III. We facts. reject arguments each of PIC's

IV We consider in turn.

HH in not issue. PIC is default is at Whether Although vigorously disputed issue of its de- PIC appeals, PIC before the circuit court court of fault dispute in it is default. not here that does argued al- 4. PIC before the circuit court that though in failed serve an answer had naming plaintiffs complaint response to amended defendant, PIC be held in default PIC as should not present case. moved under the circumstances of PIC enlarge in PIC for the circuit court to time which agreed appeals The court of with that the circuit court PIC failing damage award erred to offset PIC subrogated already paid had amount insurer on plaintiff. appeals The of the circuit court court thus reversed for clerk of and remanded cause with directions this issue adjust judgment against PIC to account for the courts Otto, $46,635.26. See 2d of Estate Wis. offset respects, appeals 28-32. all other the court of affirmed ¶¶ judgment. the circuit court's portion plaintiff petition declined to review that opinion appeals' reversing court of the circuit court's part. arguing neglect- file answer,

could and serve its that its ing originally an serve answer within the time specified was excusable.2 explained

¶ 5. PIC its failure serve an answer timely represent as follows: hired PIC counsel to PIC (most and all of PIC's codefendants whom of were PIC's insureds) action; in the the counsel hired PIC timely intended to serve an answer on behalf of all including action, defendants in the PIC; the counsel (which an served answer denied defendants) all on behalf PIC's but codefendants inadvertently caption omitted PIC's name from the answer; counsel's inadvertent omission of PIC's computer-based name stemmed from a clerical or error PIC's, counsel's, fault; without parties or counsel's staffs litigate

continued to the action for than more anyone nine months before PIC's noticed failure to year plaintiff answer and for more than one before the judgment against plaintiff PIC; moved for default parties along and all other or all knew believed that the representing rep- counsel PIC's codefendants was also resenting PIC; and the counsel hired PIC immedi- ately including filed an amended answer PIC's name in caption prior finally when counsel's omission was called to his attention. argued

¶ 6. PIC circuit court that notwith- standing oversight counsel, of its PIC had at all diligently times defended action on its merits on behalf of itself and its codefendants. PIC contended oversight prejudice that when counsel's has caused no argued neglect PIC court PIC's circuit was of might the kind "which been act of reasonably have prudent person under the same circumstances." See Connor v. Connor, 49, 279, 2001 WI 243 Wis. 2d N.W.2d 182 omitted). (quotation marks and citation weigh heavily justice plaintiff, of the the interests

to plaintiff accepting not The did PIC's answer. favor of argue prejudiced by PIC's it the circuit that was to court timely. failure serve its answer argument un- to the circuit court was 7. PIC's of fact The court found as matters successful. circuit representing purportedly PIC had that the counsel complaint accepted plaintiffs on amended service the accept but had refused to PIC's codefendants behalf of plaintiff had been behalf; that the on PIC's service complaint person- to PIC its amended forced to serve showing ally; in the record no evidence that there was counsel that it had been served that PIC ever notified complaint requested or counsel the amended with "[fjrom behalf; file an on its serve or answer (when August through 24, 2004 PIC 30, October 2003 Court), [counsel the the for filed an Answer with codefendants] documents with filed numerous formal by listing being represented his PIC as Court, the none "[h]earings held on motions to strike firm";3 that were Melby expert [an testimony expert Dr. witness the plaintiff] April strike 20, on 2004 and to called testimony Hogan expert [another witness certain of Dr. July plaintiff] 13, that "PIC on 2004" and called hearings."4 appear at with counsel those did not either counsel for codefendants The record shows that with the circuit or his filed 12 formal documents cocounsel PIC's during period. Each document listed court relevant codefendants, PIC, by counsel's being represented as but not firm. 2004, hearing in the transcript April is not The of the 13, 2004, hearing is. However, transcript July

record. July hearing, for the cocounsel beginning At as follows: defendants identified herself ¶ 8. them, On the basis of the as it facts found neglect circuit court determined that PIC's was not excusable. circuit court thus denied PIC's motion to enlarge the time in which to file and serve an answer granted plaintiffs motion to strike the answer untimely. that PIC had served petition

¶ 9. In the filed review with this court, PIC declined to contest is in default for its timely. failure to serve an answer PIC concedes before this court that its failure to serve an answer cannot be excused under the circumstances of the present properly case; that the circuit court denied enlarge PIC's motion the time in which to serve and properly answer; file an and that the circuit court granted plaintiffs untimely motion to strike PIC's short, PIC default, answer. concedes that is in that join is, that PIC has failed without excuse to issue of law or fact.

t—1 1—I ¶ 10. Weturn now to the issue to in be decided petition presents only single instant case. a PIC's issue by pertains legal for this review court. That issue now-acknowledged of effect PIC's We default.5 decide in present single case this issue of that law PIC has Lubinsky Axley Brynelson appearing Lori firm on of behalf defendants, Folkestad, Witt, Charles Terrence Red Cedar provided and the Fund to the Clinic extent we a defense for the Fund. found, As the circuit court of counsel's recitation the clients appeared represent she to did not include PIC.

5 In petition, explicitly its PIC addressed decision not to its petition for review of the additional issues that PIC raised argued petition explains before lower courts. PIC's although "disagrees ruling PIC with the lower on all courts' of

presented not address or decide for our review. We do any or court of decided the circuit court issues petition appeals in PIC's to this court. but not raised presents petition in its to that PIC 11. The issue may Did the be as follows: answer this stated court denying by timely PIC's insureds served codefendant as to PIC's benefit so all defendants inure of preclude, law, of a to as matter damages, plaintiffs against PIC for the notwithstand- acknowledged ing default?6 PIC's contends that an- 12. PIC because denied the its codefendant insureds swer of default is limited and defendants, the effect of PIC's all partial PIC that it a matter of asserts remains as law. its issue of insureds' causal to a trial on the entitled issues," key opted petition its "on the PIC focus the default effect of impression pertaining first Wisconsin issue of Phy- Defendant-Appellant the default." Petition for Review Wisconsin, Inc. at 6. Company Insurance sicians pressed court also PIC's argument, At members this oral or PIC for statement of the issue issues that appellate counsel confirmed argue intended to before this court. Counsel PIC many argued among the issues PIC raised and before courts, present all but one "narrow” PIC had declined lower by this court. issue for review following is of the issue in its Petition PIC's statement Opening in its Brief in this court: for and Review appropriate impоse $1 an almost million default Is it answering damages all of the caused its on late insurer for a the issue in the insured where the insureds —whose conduct is vigorously liability timely disputed and all of Plaintiffs' case— damage allegations through the defense counsel the insurer and joint provide a for and its insureds? The trial defense it retained preclude ruled the effect of the insurer's default was to court that negligent challenging it its insureds were even from whether timely allegations though and denied all of Plaintiffs' insureds $972,469.81 judgment against imposed a the insurer. default negligence liability plaintiff. According and PIC's only precludes contesting PIC, its default PIC from policy had at all times a material of insurance in provided coverage full force and effect that to PIC's malpractice codefendant for of insureds claims the kind alleged by plaintiff. argues words, other PIC only the effect of PIC's default is to admit its uncondi- coverage for the tional eodefendant insureds. ap-

¶ 13. We affirm the decision of the court peals. We conclude that the circuit court did not err as rendering judgment by a matter of law default against plaintiffs damages. PIC determine, for We appeals, did the as circuit court and the court of that the denying answer of codefendant insureds not, of all law, defendants did as a matter preclude judgment default PIC on the issue damages upon acknowledged PIC's de- acknowledged We fault. hold that PIC's sub- default jected judgment by plaintiffs PIC to a damages against it. Accordingly,

¶ 14. we affirm the decision appeals affirming court of the circuit court's default judgment against damages. PIC for

H—4 l—l H-1 briefly ¶ 15. We summarize the relevant to facts presents the issue that PIC for review. Shelley Ashley Otto, Otto, 16. Dale Otto complaint doctors,

filed a medical the clinic two employing doctors, the doctors' and clinic's fictitious Compensation insurers, and the Wisconsin Patients' complaint pled, alia, Fund.7 The inter of action causes subrogated also complaint named a defendant. recovery damages allegedly the doctors' for of caused long complaint negligence. the Otto not after Dale died was filed. complaint Upon

¶ death, an amended 17. Otto's substituting of Otto Estate Dale Otto for filed the was personally adding plain- Otto as a named

and Amanda complaint for also substituted PIC tiff.8 The amended original complaint in named the the fictitious insurers alleged all had, PIC full force and effect at that covering policy the times, a of insurance material damages alleged employer for the doctors and their plaintiff. complaint pled causes of ac- 18. The amended negligence only against code- medical not tion for "against. Physicians directly . . also fendant doctors but Company Wisconsin, Inc." of Insurance alleged complaint plaintiffs that PIC's code- amended negligent causing damages to fendant insureds were "Physicians Company plaintiff and that Insurance directly [is] Wisconsin, . . to Plaintiffs of Inc. . liable proven to trial." an amount be at Guy Attorney an DeBeau served filed complaint behalf to amended on answer employer on doctors and the doctors' November employer and their denied The answer doctors negligent allegation plaintiffs doctors were they damages plaintiff. or that had caused Although filed on behalf the answer was not or served specifically PIC, the denied PIC's answer any damages; plaintiffs "had admitted PIC policy insurance in full at a time material hereto a [the provided coverage doctors force and effect which addition, complaint named a second the amended in the subrogated defendant action. employer]

and the doctors' for claims of the nature alleged by plaintiffs"; "specifically aver[red] coverage provided policy that the extent of under said policy limited the terms and conditions of said . .. plaintiff ¶ 20. The served PIC the amended com- plaint and on 20, 2003, November fifteen summons days after the codefendant insureds had served and plaintiff initially Attorney filed their answer. The asked DeBeau to admit service of the amended summons and complaint on behalf of PIC. For reasons unclear from Attorney plaintiff record, the ultimately DeBeau declined. The personally through

served PIC its vice- president of claims.

¶ 21. The amended summons informed PIC that "[wjithin days receiving th[e] summons," PIC required "respond would answer, be with a written as Chapter term is in used 802 of the Wisconsin complaint." Statutes, The amended summons provide proper further advised PIC that if it did "not days, may grant judgment answer within 45 against you the court money legal for the award of or other requested complaint." in the eight

¶ 22. PIC answered some months later. On August 23, 2004, PIC answered the form of an by Attorney amended answer served and filed DeBeau employer, doctors, on behalf of the their and the defen- untimely.9 dant. PIC's answer was súmmons, As stated in the amended the time allotted to (Rule) 802.09(1) days. § PIC answer was 45 See Wis. Stat. (2003-04) ("A party plead response shall to an amended pleading days plead within 45 after service amended ing.").

All subsequent references to the Wisconsin Statutes are to the 2003-04 version unless otherwise indicated. judgment by plaintiff moved for 23. The striking PIC PIC's answer. an order PIC and for enlarging and serve the time to file an order

moved for an PIC's motion for The circuit court denied its answer. enlarging answer, its the time to file and serve order finding not the to answer was that PIC's failure (Rule) neglect.10 Wis. Stat. excusable See result of 801.15(2)(a). PIC's ordered that The circuit court then judgment by untimely de- struck and that answer be against it. fault be entered subsequent to the circuit filed a brief judgment, entry PIC of default

court's order for argued had the sole court that its default to the circuit asserting "estopped rendering its from PIC effect of argued policy could not PIC that its default defenses." allegation litigating plaintiffs preclude PIC from negligently caused PIC the doctors insured Although damages plaintiff. circuit court had judg- already granted plaintiffs default motion for remedy argued of a default ment, that the PIC plaintiff the circum- under not available to was present case. stances rejected argument PIC's court 25. The circuit subject made it to a that PIC's default and determined damages. plaintiffs judgment by for the default hearing to determine the a circuit court scheduled plaintiffs damages.11 amount of (Rule) 801.15(2)(a) (providing relevant See Wis. Stat. in which to enlargement of the time part that if a motion for specified expiration of the "is made after the perform an act finds that the time, granted the court shall not be unless neglect"). was the result of excusable failure to act Co., n.5, 2d Sentry Ins. 109 Wis. See Hedtcke v. (1982) entry judgment, a default ("Upon 326 N.W.2d727 inquiry to determine may hearing hold or circuit court a damages.").

¶ 26. After the circuit court determined that PIC plaintiffs damages, would be liable its default for the the circuit court ordered the codefendant insureds upon stipulation plaintiff dismissed a between the insureds. Under the terms of the circuit court's against dismissal, order of all claims the codefendant prejudice insureds were dismissed without and without any party, plaintiff costs to and the covenanted not to applicable refile the action for the remainder of the period. pro- limitations The circuit court's order also finding vided that no would be made as to whether the negligent defendant doctors had been or had demon- unprofessional strated conduct. conducting hearing damages,

¶ 27. After on judgment by circuit court rendered default PIC plaintiffs compensatory damages, plus fees, for the costs, and interest.

IV argument ¶ 28. We address PIC's that the denying answer of the codefendant insureds the liabil- ity preclude of all defendants inured to PIC so as to judgment by notwithstanding PIC PIC's acknowledged default. grant

¶ 29. The decision whether to a motion for judgment by default lies within the sound discretion of reviewing the circuit tionary court.12 a circuit court's discre- appellate questions decision, an court decides of in law imbedded independently the circuit court's exercise of discretion benefiting

of circuit court but from 12 Hardwoods, Inc., Split Liquidators, Rock Inc. v. Lumber 66, 63, 238, 2002 253 2d WI Wis. 646 N.W.2d 19. ¶

97 presented analysis.13 case the instant its The issue interpret apply requires and rules this court to adopted by procedure pleading, practice, this court Interpretation pursuant these to Wis. Stat. 751.12. question presents that this court deter- of law rules independently court and court of of the circuit mines analyses.14 benefiting appeals their but from arguments sup- following ¶ makes the 30. PIC position port answer of the code- of its liability denying all defendants fendant insureds preclude, law, a a matter of to it so as to as inured notwithstanding judgment its ac- (A) knowledged cannot establish PIC's default default: dependent liability completely liability, is because its its upon liability codefendant insureds and PIC of its negligence of its its default the thus cannot admit (B) supports PIC's insureds; Wisconsin law codefendant (C) jurisdictions supports position; other Case law from (D) jurisdictions position; Case law from other PIC's that the circuit court's default demonstrates against improperly invited inconsistent the defendant (E) policy consider- action; in the Public outcomes limiting support an the effect of PIC's default to ations reject coverage. each We admission of unconditional argument in turn.

A argument ¶ that its is 31. PIC's first upon completely dependent of ‍‌​​​‌​​​​​‌‌​​​‌‌‌​‌‌​​​‌​​‌‌​‌​​‌‌​‌‌​​‌‌​‌‌‌‌‌‍its codefen- 26, 40, 72, 2d 2007 WI 301 Wis. Kocken v. Wis. Council 266, 732 N.W.2d 828. Pertzborn, 62, 16, v. 2001 WI Waters ex rel. Skow 2d 627 N.W.2d 497.

Wis. therefore cannot admit its and that it dant insureds negligence insureds. We of its codefendant contrary argument is to Wis. Stat. that this conclude statute. 632.24, "direct action" Wisconsin's any provides that ¶ action statute 32. direct negligence liability covering policy makes the insur- person company to recover entitled ance against liable to up policy limits. Under insured to the party may allege complaining statute, the direct action liability conduct, the insurer's there- the insured's directly against The statute renders the insurer. for, "directly its for the conduct of the insurer liable" may directly against "[J]udgment be insured.15 directly payment to the . must be made insurer and . . injured party."16 is not a neces- addition, the insured brought against sary party its insurer.17 provides in full as follows: Section 632.24 Any or INSURER. bond DIRECT ACTION AGAINST covering liability to others for policy of insurance liable, up insurer negligence makes persons policy, in the bond or amounts stated insured for the death entitled to recover injury property, or any persons or for person presently is estab- irrespective of whether the fixed or certain contingent and to become lished or is the insured. final action statute contra- The text of the direct "completely that PIC's dicts PIC's assertion Bunderson, 400, 423, 2d 320 N.W.2d 175 Loy 107 Wis. v. (1982).

16Id. at 423. at 421. Id.

dependent liability."18 [its insureds'] on The statute may "irrespec- expressly that an be liable states insurer liability presently is tive of whether the is established or contingent by and become fixed or certain final judgment against the insured." liability dependent

¶ course, is, 35. An insurer's of upon insured, its but the insurer's the conduct of necessarily dependent on the insured's is not liability. recovery against There can no the insurer be giving unless the insured's conduct rise to proven. interpreting applying

¶ cases 36. Our "[t]he responsibility direct action statute establish that injured company party of an insurance to an is deriva- conduct, of the insured's but it is not derivative of tive personal liability plain- the status of the insured's to a tiff. . . ."19The case further that liabil- law establishes ity may "upon irrespective imposed the insurer be of judgment against whether there is a final the in- Indeed, circumstances, sured."20 under certain the in- subject may judgment against surer be to a it even recovery precluded by against when the insured is law.21

18 Defendant-Appellant- Opening Appendix Brief and Wisconsin, Physicians Company Petitioner Insurance Inc. at 11. added). Loy, (emphasis 2d at 107 Wis.

20Id. at 421. 21 We have stated that the direct action statute embodies (1) following legislative purposes: litigation three to "save expense by determining rights parties and reduce the of all single usually in a action which is defended the insurance (2) carrier"; litigation "expedite the final settlement of Indemnity Kujawa Co., 245 Wis. v.American (1944), example. provides such one 361, 14 N.W.2d Kujawa proceed Kujawa could held This court properly a defendant commenced with although recovery the tortfeasor- insurer applicable statute barred under insured was limitations. Indemnity Kujawa for dam- American sued Kujawa

ages in an automobile accident suffered allegedly of American the tortious conduct caused Kujawa bring Indemnity's action did not insured. Kujawa's against action After the tortfeasor-insured. applicable under the commenced, the time allotted was barring Kujawa's expired, cause limitation statute of against The trial court the tortfeasor-insured. action granted summary Indemnity's motion for

American being Kujawa, holding "[t]here against [the insured] part then there is no the no liability on part carrier because of the insurance on indemnify."22 there is no one to under its contract deci- the trial court's This court reversed Kujawa proceed permitting with the cause to sion, Indemnity, although against in- American action to if he be entitled injured person, payment final to the (3) upon insurance burden recovery"; "place liability to for its compensated in advance has been carrier who damage injuries person for such damage assessed pay the negligence on the by actionable have been caused property as Appre & Monthly Incomе insured." Decade's part person S.C., 665, Hirschboeck, 2d 173 Wis. Whyte & Fund v. ciation (1993) v. Inter-State (quoting Ducommun 675, 335 295 N.W.2d denied, 185, 289, 193 reh'g 212 N.W. Exchange, 193 Wis. (1927)). 185, 214 Wis. N.W. Co., 361, 363, 14 N.W.2d Am. 245 Wis. Kujawa v. Indem. (1944). Kujawa. sured could not be liable to The court stated Kujawa that under the Wisconsin statute, direct action pursue was entitled to the cause of action long Kujawa defendant insurer alone.23 So as had a cause of action the insured at the time the action commenced, was further discussion about the according was, statute of limitation court, to this "un- necessary."24 Kujawa's It was of no moment that recovery against Indemnity could result in American any recovery when the statute of limitation would bar against the insured. necessary corollary

¶ 40. A of the insurer's direct injured complainant to an is that the insurer may allegation liability, admit an of its as well as the underlying allegation of the tortious conduct of its brought directly against insured. When the action is party insurer and the insured is action, not a ability deny insurer must have the to admit or plaintiffs allegations as the insurer sees fit. plaintiff present pled

¶ 41. The in the case causes negligence directly against of action for medical PIC. plaintiff alleged, directly against PIC, that PIC's negligently damages plaintiff insureds caused to the "directly plaintiff and that PIC was liable" to the due to negligence obligated the causal of its insured. PIC was allegations. to answer these ordinary allegations ¶ 42. The rule is that the in a complaint "are admitted when not denied" in the an- against allegations swer of a defendant whom the are made.25 Furthermore, when a defendant is determined

23Id.

24 Id. at 366. (Rule) 802.02(4). § Wis. Stat. allegations default, the factual to be relating except amount of to the those defendant, Nothing ordinarily in the damages, deemed true.26 are liability plaintiff serves to to the nature of an insurer's impair general operation rules. of these Although direct action that the we conclude by may its default PIC admit shows that statute negligence and its own insureds its codefendant liability plaintiff, consequent do not conclude we PIC's default shows that action statute the direct the circum- admission under such an must constitute present plaintiff present in the case. stances only against brought PIC but also action not case agаinst timely denying insureds, who answered PIC's action statute The direct all defendants. question speak whether not does liability may denying inure to an insured answer of company defaulting so as insurance of a benefit judgment preclude default arguments damages. plaintiffs PIC's other We examine position inures supporting answer that an insured's its company defaulting when insurance of a to the benefit and the been determined has not the insured's the case. from insured is dismissed

B argument Wisconsin is that second 44. PIC's despite default, PIC can PIC's demonstrates law negligence. advantage We denial of its insureds' take acknowledged disagree PIC's The effect of PIC. with expose PIC to default was damages.

against it for Civil Proce Series: Grenig, Practice Jay E. Wisconsin 3A (3d 2003). 602.3, ed. at 171 dure (Rule) begin

¶ 45. 806.02, We with Wis. Stat. governing judgment judgment default cases. Default may be if rendered no issue of law or fact been has joined joining expired. if and the time for issue has (Rules) 806.02(1) (2), Sections and which are relevant present in case which PIC defaulted for failure to timely, provide answer in full as follows: (1) judgment A may provided default be rendered in as (1) (4) subs. if no joined issue of law or fact has been and joining Any if the time for expired. issue has appearing defendant an shall be entitled notice of for judgment. motion (2) filing complaint proof After the and of service of or summons on one more of the an defendants and affidavit that the defendant in default for failure to join issue, plaintiff may for move accord- ing to the demand of the If complaint. of amount money sought was excluded from the for demand judgment, required (lm), as under s. 802.02 the court require shall the plaintiff to specify amount of money provide claimed that information to the court parties prior and to other to the court rendering judgment. proof any If fact is necessary judgment, give court to the court shall receive the proof. (Rules) 806.02(1) (2)

¶ 46. are, Sections on position face, their inconsistent with PIC's denying answer its codefendants of all precludes judgment by defendants damages. PIC for (1) expressly

¶ 47. Subsection cir- authorizes the judgment by cuit court to render a default in circum- present when, case, stances as "no issue law or joined joining fact has been and . . . the time for issue expired." has PIC concedes it has failed in the join present of fact and that the time case to issue law or joining expired. has for issue (1) although expressly

¶ Moreover, 48. subsection ("Any involving multiple contemplates defendants cases appearing in an be to action shall entitled defendant judgment...."), of for text of notice motion may suggest that there be circum- subsection does not may join in defendant fact or which one issue of stances (Rule) § language plain behalf of another. of law on 806.02(1) subject a thus to render defendant to seems a join judgment against it to of for its failure issue default or fact. law (2)

¶ further reinforces the con- 49. Subsection cept default make that the effect of a defendant's is to against remedy judgment a default of available (2) plainly a states that when the defendant. Subsection join "the issue, is for to in default failure defendant may judgment according plaintiff de- for to the move complaint." Nothing in the text subsec- mand (2) right suggests plaintiffs for that the move tion may judgment condi- a defendant in default be upon a of an served content answer tional not in default. codefendant Significantly, judgment statute default party

provides is in a in default no circumstances which provisions yet exempt a matter law from is as and argument judgment is PIC's the default statute. essentially exemption does PIC an exist: that such yet present case is in default in concedes judgment may rendered be denies that default We see no textual the default statute. it under proposed by recognizing exemption PIC. basis judgment statute, addition (Rule) § governs 802.02, which Stat. look Wis. we pleadings. (Rule) particular, examine, We Wis. Stat. 802.02(2) (4), setting general deny- and forth rules for allegations ing plaintiffs complaint specify- in the ing deny the effect of defendant's failure to such allegations. provide in These subsections full as follows:

(2) DEFENSES; FORM OF A party DENIALS. shall plain state short and terms the defenses each deny claim asserted shall or admit the averments upon party party which the adverse If relies. knowledge without or form information sufficient to a averment, party belief as to the truth an the shall so and has the a state this effect of denial. Denials shall fairly meet the substance of the averments denied. The pleader specific shall make the as denials denials of designated paragraphs, pleader averments or if but a good deny only intends in part faith to a or qualifica- a averment, of an the pleader specify tion shall so much of it as is deny only true and material and shall the remainder.

(4) EFFECT FAILURE OF TO DENY. in Averments a pleading responsive to pleading required, which is fact, than as to other those nature and extent of injury damage, and are admitted when not denied in responsive pleading, that a except party whose prior pleadings forth set all denials and to defenses be upon defending relied in a claim need contribution respond not claim. pleading to such Averments in a responsive required no pleading which or permitted is be taken denied shall as or avoided.

¶ statute, Like the default Wis. Stat. (Rule) 802.02(2) (4) § and are inconsistent with PIC's position present provisions in case. The text of these premise, implicit argument, belies in PIC's that PIC justified assuming that a codefendant's answer allegations denying plaintiffs complaint common in the forgo responding permitting it to has effect repercussion. allegations those same without (2) establishes a defendant's 53. Subsection plaintiffs pleadings duty respond without to the duty by responsive qualifying reference this 802.02(2) (Rule) pleadings codefendant. Section of a party "[a] simply shall state in short and mandates plain terms defenses to each claim asserted deny upon which the admit or the averments shall added). Nothing party (emphasis in the relies" adverse (2) language suggests that this clear text of subsection requiring deny plaintiffs party aver- to admit or may apply party when a codefendant of ments not party. denied an averment on behalf has 802.02(4) (Rule) also Stat. Wisconsin posi- contradiction to PIC's stands clear and direct (4) present in the case. Subsection establishes tion complaint plaintiffs are deemed to be averments in a responsive in a defendant's admitted when not denied exceptions. exceptions, pleading, These with certain pertains applying fact, an "to the na- when averment injury damage" or when and extent of ture "prior pleadings forth all denials and set defendant's defending upon a claim for to relied defenses be exception PIC not include the contribution," do 802.02(4) (Rule) present does case. Section seeks general suggest rule therein cannot that the stated not separate apply is denied in the when the averment responsive pleading of a codefendant. (Rule) 802.02(4) §

¶ demon- 55. Wisconsin Stat. judgment a default made strates that PIC's appropriate of the circuit court. discretion within directly against pled support PIC, the causes negligent alleged plaintiff were that PIC's insureds causing damages plaintiff PIC is "di- to the

107 rectly plaintiff damages. liable" to the for these PIC, in failing deny allegation timely to this of its in answer, admitted it. With the issue of resolved only damages virtue default, of PIC's the amount of entry was left to be determined before against PIC.27 position

¶ contrary 56. Moreover, PIC's to Wis. (Rules) 802.06(1) 802.09(1). §§ provi- Stat. These unequivocal duty sions establish PIC's to serve its timely complaint answer served it.28Our precedent recognizes importance provi- of these "[t]he expect sions. We have held that Wisconsin rules timely promptly that answers will be served and filed. ought authority impose Courts to have a serious timely appropriate sanction for failure to 'serve,' and an sanction, modest, however for failure to file 'within a "29 reasonable time after service.' position comport 57. PIC's does not with statutory provisions imposing duty to serve an answer recognizing or with our case law the circuit authority impose court's a serious sanction for failure timely. to serve an answer ("If See 3A Grenig, supra 26, 602.3, § note at 171

court determines the default, defendant is in allega the factual tions of the complaint, except relating those to the amount of true.") damages, will be taken (citing as Wright Charles Alan et al., (1998) Federal Practice and § Procedure: Civil 2d pertaining Procedure). to Rule 55 of the Federal Rules of Civil (Rule) 802.06(1) ("[A] See Wis. Stat. defendant shall times]....") serve an answer [specifying within (emphasis (Rule) 802.09(1) ("A added); § party plead in response shall times]...") an amended pleading within [specifying (emphasis added). 29Split Hardwoods, Rock 2dWis.

108 suggests consequence ¶ of its 58. PIC merely present in the case is an admission of coverage. consequence, however, is unconditional This сonsequence obligation at all when the insurer's no (and obligation) of this is insure the matter the extent coverage not contested.30 PIC concedes that insurance coverage is and that it never contested and never clear coverage. intended to contest proposes

¶ 59. The rule PIC would render the 802.06(1) (Rule) §§ mandatory provisions of Wis. Stat. 802.09(1) virtually optional in cases in which the coverage damages indisputably provides insurer for the alleged plaintiffs complaint. in the 438, 440, 2d 344 60. Martin v. 117 Wis. Griffin, (Ct. 1984), App. germane present is N.W.2d 206 appeals Martin, In the court sustained a default case. significantly on facts and issues not distin guishable present case. from those brought case, In the Martin Martin (insurer Casualty Griffin, Aetna of the vehicle (Griffin's Griffin), operated by and Milbank Mutual insurer), alleging negligence personal that Griffin's damages Casualty $150,000 to Martin.31Aetna caused 30Indeed, it clear that deemed admission of uncon is not coverage any consequence would be of to PIC in the ditional answer, untimely that it "had at present case. its PIC admitted policy material hereto a of insurance in full force and effect time provided coverage to codefendant for claims [the insureds] which by plaintiffs." attempt plead PIC did "the alleged of the nature coverage policy" and conditions of said as a limitation on its terms obligations, not clear from the record that PIC could but any expected policy and conditions of its to make have terms contract with its codefendant insureds practical difference. PIC's in the is not record. 438, 440-41, Martin v. Griffin, 2d 117 Wis. N.W.2d (Ct. 1984) App. timely denying Griffin,

answered on behalf of itself and negligent alleging that Griffin was that the acci- negligence.32 dent was caused Martin's Milbank timely. Mutual's not answer was The circuit court untimely answer, struck Milbank Mutual's dismissed Milbank Mutual's action, codefendants from the judgment by entered a Milbank Mutual $150,000. the amount of present ¶ 62. case, Relevant to the Milbank Mu- argued appeal erroneously tual on that the circuit court striking exercised its discretion in Milbank Mutual's untimely granting judgment answer and a default damages. it for Milbank Mutual contended that timely its failure to answer was due to excusable neglect, explaining supervisor respon- that the claims handling complaint sible for Mаrtin's had "concluded erroneously pro- that Aetna's answer was sufficient to given insured," tect Milbank and its primary that "Aetna was the provided coverage exceeding insurer and damages complaint."33 demanded in the Milbank Mu- explained generally tual further that it wrote no cover- age any allowing "in Wisconsin or in state insurance companies directly requiring to be sued or them complaints involving answer their insureds."34 appeals ¶ 63. The Martin court of affirmed the damages, holding circuit court's default for "[i]t neglect, law, not excusable as a matter of company timely an insurance to fail file answer due good personnel to the faith that, belief of its there since appeared primary coverage to be a insurer with exceed-

32 Martin, See 111 Wis. 2d at 441; Brief of Milbank Mutual Appeals Court at 1-2. 33 Martin, 111 2dWis. at 441. 34 Id. alleged complaint, ing damages in the Wisconsin law require it to answer."35 did not significantly are not 64. The facts of Martin present

distinguishable case. In from those of the Casualty Martin, Aetna Milbank Mutual's codefendant defendant on behalf of itself and the answered allegation denying that the defendant insured, Martin's negligent. case, the codefen- In the instant insured was similarly timely on their own answered dant insureds allegation negligence. denying plaintiffs behalf, the spared principled that PIC should be is no reason There judg- judgment against the default it when a default despite against Milbank Mutual was sustained ment timely Mutual's codefendant answer of Milbank part denying negligence of Milbank Mutual's on codefendant insured. arguments

¶ forth the defendant 65. The set although case, instant insurers in. Martin and the essentially differently, for are the same structured present position purposes in the case. The of PIC position present the defendant insurer case, like the timely upon premise Martin, rests in preclud- may have the effect of of a codefendant answer ing judgment by against a defendant insurer default timely. Martin, In Mutual Milbank fails to answer who timely rely upon excusably argued it could default so as to avoid a of its codefendant answer (and judgment). to avoid a default situation thus also argues that, even its default but PIC concedes timely rely upon answer of default, it is entitled to judgment. a default its codefendаnt to avoid argument present case ¶ Indeed, 66. PIC's argument version of seems to be a more ambitious Id. at Ill set in Martin. Milbank that Milbank Mutual forth only upon the an- contended that its reliance Mutual although erroneous, was excus- codefendant, of its swer default) (in right rely upon the able. PIC asserts Milbank Mutual of its codefendant. What answer PIC in the instant case claims as excuse, claimed as an an entitlement. appeals' sum, the Martin court of decision judgment

sustaining court's default the circuit judg- strongly supports the default Milbank Mutual It little sense for rendered PIC. makes ment damages spared a default PIC to be against subject to a it when Milbank Mutual was judgment despite answer Milbank denying that Milbank Mutual's Mutual's codefendant negligent. insured was attempts distinguish Martin on the 68. PIC

ground insured in Martin failed to that the defendant that the insured and was in default. PIC asserts answer "[therefore, "failed to answer" and that there in Martin denying negligence that could have no answer was [sic]."36 of PIC further inured to benefit Millbank appeals the court of "addressed the effect of asserts that separate Mutual's] [defen- [Milbank from the argues insured's] that it "the dant default."37 PIC was ," of the insured's default... not the effect effect of [the insured's] default, Mutual's "to establish Milbank negligence."38 Physi Reply Defendant-Appellant-Petitioner Brief of Wisconsin, of Inc. at 8 n.4. Company

cians Insurance Appendix Defendant-Appellant- Brief Opening and Wisconsin, Inc. at Physicians Company Insurance Petitioner 20-21. 38Id at 21.

¶ PIC's account of Martin is inaccurate. expressly appeals referenced the answer Martin court of Casualty, Al- Aetna Milbank Mutual's codefendant.39 though opinion as to the content of the Martin is silent Casualty's answer, Mutual's brief to the Aetna Milbank appeals court of stated that "the answer denied that negligent alleged [the] [insured] defendant ‍‌​​​‌​​​​​‌‌​​​‌‌‌​‌‌​​​‌​​‌‌​‌​​‌‌​‌‌​​‌‌​‌‌‌‌‌‍was plaintiffs negli- caused that the accident was gence."40 in PIC's that there was no answer assertion negligence denying that Martin the insured's could Milbank Mutual is not have inured to the benefit of according opinion correct, to the and briefs in the Martin case. asserting 70. PIC is also incorrect that in Martin in default. Milbank

defendant insured was appeals Mutual's brief to the court of stated that "Aetna Surety Company interposed Casualty an answer on Griffin, III of itself and defendant John Francis behalf opinion insured]."41 [the in its did the Martin Nowhere any appeals suggest than court of that defendant other answer or was Milbank Mutual had failed to default. additionally PIC directs our attention to interprets opinion PIC as in the Martin

statements limiting Mutual's default to an the effect of Milbank Early opin- coverage. in its admission of unconditional "[w]ithout appeals stated that ion, the Martin court of admit- answer, Milbank is deemed law to have valid allegation qualification, Martin's ted, without 39 Martin, 2d at 441. 117 Wis. Company Brief of Mutual Insurance Milbank Appeals at 1-2.

Court 41 Id. at 1. liability negligence."42 covered Griffin's for A similar appears opinion: "By failing in statement also later denial, to file a answer of Milbank has admitted allegation policy [the the unconditioned that its covered liability damages insured] negli- for caused his argues gence."43PIC that these statements that show appeals perceived the court of Milbank Mutual's default solely in to result an admission of unconditional cover- age, negligence not in an admission of its in insured's or liability. disagree interpretation

¶ 72. We with PIC's opinion. these statements in the Martin The court of appeals' assertions about Milbank Mutual's default con- stituting coverage clearly an admission of were directed argument despite at default, Milbank Mutual's its liability according Milbank Mutual's provisions should be limited to policy limiting in its with insured Milbank coverage damages Mutual's in excess of those that (the insurer) Casualty primary obligated Aetna was unsurprising appeals cover. It is that the court of re- sponded to Milbank Mutual's contention could argue coverage by holding for limited even that Milbank Mutual's default constituted an admission coverage. opinion, of unconditional Elsewhere its appeals Martin court of described the effect of Milbank broadly: default more Mutual's "Milbank has ... waived opportunity argue respec- its issues and the obligations companies."44 tive of the two insurance This language makes clear that the effect of Milbank Mutual's default was to establish both coverage irrespective obliga- unconditional of Aetna's tions.

42Martin, 117 Wis. 2d at 440.

43Id. at 444. added). (emphasis Id. appeals' Moreover, the Martin court of man- affirming judgment аgainst date the default Milbank damages necessarily implies Mutual for that Milbank full-fledged Mutual's default constituted a admission of except its to Martin. No other basis Milbank judgment imposing Mutual's default existed for a ity liabil- negligence on Milbank for the of its insured. As we allegation negligence stated, have denied, was not admitted, in the answer of Milbank's codefen- judgment against clearly dant. The default Milbank improper would have been if Milbank's default had not liability. established its judgment against

¶ 74. The default PIC in the supported by instant case is further Gerth v. American Co., Star Insurance 166 Wis. 2d 836 N.W.2d (Ct. 1992). App. represents Gerth another case in which appeals the court of sustained a default on significantly distinguishable facts not from con- those sidered here. brought

¶ 75. Gerth Reid Boiler Star, Works and American Although Reid Boiler's insurer. opinion matter, is silent on the Reid apparently timely.45 Boiler Works answered American timely. Star failed to answer The circuit court denied American Star's motion to extend the time for answer- ing (finding neglect), granted no excusable Gerth's untimely answer, motion to strike American Star's judgment by entered a American Star damages. correctly opin- PIC states that the Gerth ion does not discuss whether an of a answer codefen- dant should inure to the benefit of the insurer. Gerth Company Brief of American Star Insurance to the Court ("Reid Appeals at Boiler appeared Works counsel and Complaint denying Complaint's allega answered the all of the ."). except allegations tions of Reid's existence ... neglect, an

about excusable issue not before us present case. But the result Gerth does not favor PIC. Finally, support Clark, also find in Pett v. we (1856). Pett, the circuit court entered a 5 Wis. 198 ultimately judgment, default, and rendered a default against Reynolds Reynolds, defendants and Clark. how- previously plea ever, had filed a that was not struck and that remained in the court's record. appeal, Supreme On Court Wisconsin plea court,

held that when a was on file with the circuit against "a default could not be entered the defendant pleading case, ii."46Relevant to the instant here the judgment against default was not entered the insureds an in who had filed answer. The insureds the instant voluntarily agreed case to be dismissed from the case. The Pett did not hоld court that defendant with no entry plea file, PIC, on here was immune to the of a default.

¶ 78. PIC adduces two Wisconsin cases that Cattahach, characterizes as its favor: Leonard v. 214 (Ct. 1997), App. 236, Wis. 2d 571 444 N.W.2d (1943). Haugen Wittkopf, 276, v. Wis. 7 N.W.2d886 Haugen point However, neither Leonard nor is on present case. brought against ¶ 79. The Leonards defen- Conley (Conley's dants Sandra and DuPont Mutual insurer), alleging Conley negligently caused dam- ages Conley timely, denying Leonards. answered allegation negligence asserting Leonards' against allegedly cross-claim codefendant who also negligently damages caused to the Leonards. DuPont timely. Mutual failed to answer The circuit court struck Clark, (1856) added). Pett v. (emphasis 5 Wis. untimely judg- DuPont Mutual's answer and entered a damages. ment it for ¶ 80. Relevant case, to the instant DuPont Mu- argued appeal assuming tual on that even its answer properly was stricken, the circuit court erred enter- ing damages final in excess of DuPont policy Mutual's limits.47DuPont Mutual contended that the circuit court should have taken account of DuPont policy Conley's [the insured's] Mutual's limits, because policy answer stated that DuPont Mutual's of insurance obliga- had terms and limitations on DuPont Mutual's pay.48 appeals rejected argu- tion to The court of this refusing presume Conley's ment, answer "was by Conley plead policy meant DuPont's limits and thereby exposure, damages proved increase her if to be greater appeals than those limits."49 The court of af- judgment by damages firmed the default for in excess of policy limits entered DuPont Mutual. Although

¶ 81. it affirmed the circuit court's de- judgment, necessarily implied fault which that DuPont Mutual's default established DuPont Mutual's (with- appeals questioned to the Leonards, the court of deciding) out whether DuPont Mutual's default indeed had such an effect. In a footnote, the Leonard court of appeals stated as follows:

Although the complaint alleged only Leonards' that DuPont had obligation pay an "all sums which Conley Sandra K. might legally obligated become pay," DuPont did argue court, not to the circuit and has us, argued not Conley's answer, what effect which 47 Cattahach, Leonard v. 236, 241, Wis. 2d 571 N.W.2d (Ct. 1997). App. 48 Id. at 251. (citation omitted). Id. against [a negligence and asserted a cross-claim denied negligence codefendant], apportionment had on the Therefore, damages. exposure to thus on DuPont's ... ."50 that issue we do not address appeals Leonard, and the ¶ the court of 82. directly parties deal the issue whether did not with the insurer. answer should benefit an insured's Leonard, PIC. however, does not favor result remaining Haugen, Wis- ¶ 242 Wis. 83. point in the PIC, also not on relied on consin case judgment Haugen present case not a default case. was to answer failure did not involve defendant's and denying any allegation. Wittkopf Haugen brought recovery injuries Haugen seeking insurer, and his operated passenger in as a a vehicle sustained asserting timely, Wittkopf Wittkopf. an as answered (by Haugen had assumed ac- defense that affirmative Wittkopf negligence. any quiescence) s risk incident to did assert the but not The insurer also answered by Wittkopf. Trial had was affirmative defense asserted Haugen jury, assumed the that had not to a which found Wittkopf Wittkopf negligence. and the incident to s risk arguing Haugen together, appealed had insurer negligence Wittkopf as a incident to s assumed the risk law. matter of Wittkopf agreed and his This court with circuit court.

insurer and reversed present case, this court then considered Relevant Wittkopfs argument Haugen's insurer "not was [Haugen's] assumption risk, entitled to benefit Id. at 251 n.7. [the insurer] plead because it did not it as a defense."51 (without Assuming deciding) that such defense could be only by pleading, raised this court held that insurer's failure to raise the defense in its answer was Haugen explained immaterial. The court liability indemnify [Wittkopf] insurer's was "to and as Wittkopf is not liable the insurer is not and there can be recovery against no it."52 Haugen proposition stands for the parties

when the insured and the insurer are and each timely, answers the insurer cannot be held liable when plaintiff prove fails to on the merits that provides liability. insured's conduct a basis for Haugen ¶ 87. is of limited relevance to the present Wittkopfs case. insurer did not fail to answer deny Haugen's allegation liability. or to Hau- gen addresses a different issue: the effect of an insurer's plead failure to an affirmative defense that the insured successfully Wittkopfs spared judg- used. insurer was Wittkopf showing ment because succeeded at trial in provided that his conduct no basis for his or that of his insurer. Haugen hypo- 88. The court did not address the question Wittkopfs

thetical denying whether answer precluded judgment by would have against if insurer the insurer had failed answer Haugen's complaint timely. Likewise, we not do address hypothetical here the case in which PIC's codefendant showing insureds succeeded in at trial that their con- provide liability. duct did not a basis for their or PIC's 51 Haugen v. Wittkopf, 276, 242 Wis. 7 N.W.2d 886 (1943).

52 Id.

c juris- argues from other ¶ that case law PIC present position supports case that in the PIC's dictions despite advantage of its in- PIC can take its default negligence. all PIC cites The cases denial sureds' apply defense" doctrine. the "common version of some "[t]he According an- doctrine, defense to the common of a inures to the benefit of the codefendant swer defaulting exists a common there defendant where of them."53 as to both defense in the variation ¶ reveal substantial 90. The cases defense" doctrine "common in which the manner any, support provide if applied. little, also The cases appear upon PIC relies Indeed, the cases which PIC. position PIC is one unknown advanced that the show any jurisdiction. to the law of begins cases of of the its examination 91. PIC jurisdictions case, a Florida discussion of with other (Fla. Dist. Ct. Hebebrand, So. 2d 595 v. Rothman 1998). distinguishable from App. Rothman, however, is present Furthermore, the version case. applied the Florida defense" doctrine "common if the PIC even doctrine of no avail to would be courts present apply case. did Roth- case, sued Hebebrand the Rothman doctor) (a professional association his medical man stemming damages allegedly medi- from Rothman's professional malpractice. defaulted association cal pro- it. The action was entered jury. prevailed before the Rothman, who ceeded argued professional appeal, association On only be vicari- could the association's because (2007). Judgments § 252 Am. Jur. 2d refusing ous, the trial had court erred to set aside its liability. default after Rothman was exonerated Appeals ¶ 93. The Florida Court of held for the professional appeals association. The Rothman court of holding relied on a line of Florida "if cases that the liability defaulting completely depen- of a defendant is upon liability non-defaulting dent the of a codefendant, judgment against a final should not be entered the defaulting defendant the unless codefendant has been found liable."54 distinguishable present

¶ 94. Rothman is from the defaulting party's liability Rothman, case. In the is present liability vicarious. the case the insurer's is not completely dependent liability non-defaulting on the of a liability depends Rather, defendant. the insurer's on the present against insured's conduct. The action in the case proceed jury; the codefendant insureds not did the present codefendant in insureds case have not been by jury. Haugen, exonerated a is Rothman more like 242 276, Wis. in a codefendant a insured obtained judgment showing favor its that the conduct insured's provide liability could not a basis for the insurer's plaintiff. Haugen, Unlike Rothman or codefen- PIC's stipulated dant insureds to their dismissal from the judgment showing not did obtain a that their provide liability. conduct could not a basis PIC's importantly, application ¶ 95. More of the Florida given "common defense" rule of no would be avail to PIC procedural Although facts of the instant case. recognize defaulting Florida courts a defendant may escape a default when its 54 (Fla. Hebebrand, 595, Rothman v. 2d Dist. So. Ct. 1998). App. upon

completely dependent non- defaulting not codefendant,55 the Florida courts do defaulting permit go appear defen- far so as despite litigation participating in the to continue dant Corp. Days Acquisition example, in Inns default. For its (Fla. App. Dist. Ct. Hutchinson, 707 So. 2d v. entry 1997), Appeals Florida reversed Court judgment against Days Inns because final of a made on the merits of had been no determination non-defaulting against plaintiffs codefendant. claim "By Appeals then noted as follows: The Florida Court Days opinion imply that Inns can we do not this party participate defend as a or otherwise non-defaulting [the plaintiffs defen- claim dant]."56 apply rule court to the Florida 96. Were this participate

faithfully, present not PIC in case could party at a defendant the circuit cоurt in the action as liability. negligence and level on the issue inability participate further in the to 97. PIC's liability negligence and in the on the issue of meaningless request PIC's court would render circuit the to the circuit court that this court remand matter Hutchinson, Corp. v. Days Acquisition See Inns 707 So. 1997): (Fla. App. Dist. 2d Ct. reject require entry defer [a rule] that a trial court to

We would non-defaulting judgment cases where there are a default in all reject plaintiff per a se rule that a is co-defendants. We likewise judgment against defaulting always a to a defen- entitled adjudication non-defaulting prior of merits dant against one . .. ... relief defendant com- co-defendants. Where co-defendant, upon pletely dependent it would be improper be final entered until to allow the has decided. co-defendant been See id. at 751-52 & n.6. proceedings disputed negligence for "further so the and damage allegations can be on tried the merits."57 PIC is remaining the sole defendant in the action. code- fendants were dismissed order of the court, circuit appeal. an order from which PIC has declined With participate PIC unable the action on the issue of negligence liability, a circuit court has no "further proceedings" to conduct. jurisdiction,

¶ 98. At least one Arkansas, seems to permit defaulting carry partici defendant to on as a pant timely when a codefendant has answered asserted a defense common to all the defendants. It appears timely law, under Arkansas answer of a asserting altogether codefendant a common defense problem. example, cures the default For in Sutter v. (Ark. Payne 1999), 989 S.W.2d 887 the Arkansas Su preme "[b]ecause [the Court held that answer of a codefendant] [the was still viable at time that de faulting defendant] petition answered ... the trial court erred when it ruled that the common-defense ,"58 apply. Supreme doctrine not did .. The Arkansas part then Court stated its mandate relevant as "Accordingly, follows: reverse trial we court's order ,"59 [the striking untimely] . . answer . With its answer dilatory party struck, not in Sutter not could be in default. argue adoption

¶ 99. PIC cannot of the Arkan- present sas rule under the circumstances of the case. untimely rule, Under the Arkansas answer is not 57 Opening See Brief Appendix Defendant-Appellant- and of Physicians Wisconsin, Petitioner Company Insurance of Inc. at 3, 36.

58 1999). (Ark. Payne, 887, Sutter v. S.W.2d 989 889 59Id.

123 PIC, however, concedes struck, and the default cured. untimely properly PIC's struck that the circuit court present case. PIC is in default in the and that answer remaining PIC to aid cases cited fail 100. The defaulting Many defen- state the rule that a PIC's case. may de- dant benefit from a codefendant's successful demonstrating can be no factual basis that there fense defaulting plaintiff.60 for the defendant's (N.M. Sandoval, See, Ct. e.g., v. 761 P.2d Blea 1988) ("Plaintiffs not have been allowed to obtain App. should defendant, ownership and judgment against whose wife, his who equal were to those of possessory interests against quiet [The title action. . . . successfully defended inured to against defense that action wife's] successful benefit.") added); v. 15 Cal. (emphasis Kooper King, defendant's (Cal. ("Where 1961) more Rptr. 848, App. there are two or answering defen interposed by defenses an defendants all, right plaintiff to recover at as go dant to the whole of the right against any particular from his to recover as distinguished they prove [And] defendant. .. when such defenses successful defendant, final defaulting the benefit of the enure to only in judgment must be entered not favor therefore defendant, answering defaulting but in favor of the defendant added; (emphasis quotation marks and citations omit as well." 1932) (Or. ("[I]n ted); Soules, 623, 623 actions v. 13 P.2d Bronn jointly, interposed defendants where the defense several personal . . but answering defendant is not to himself. all, goes right plaintiff to the whole common to as where all, distinguished right from as at his to recover to recover as defendant, any particular questions or the merits or general, or his validity plaintiffs entire cause defense, sue, successful, inures to the benefit of right to such if defaulting in actions at law and suits in defendants both be not equity, the result that final must entered with defendant, answering but also in favor of merely in favor of the defendants.") defaulting (quotation marks and citation added). omitted; emphasis judgment In the instant case no has been obtained demonstrating codefendant there is no factual (like liability. appear basis for PIC's Others to hold Sutter) pre- that the answer of a codefendant vents default.61

¶ appears recognize 101. No case cited PIC adopt unusual rule that PIC asks this court to in the present yet case: PIC concedes that it is in default and proceed indefinitely asserts that it is entitled to in the party action as a defendant on the issue of damages.

D urges ¶ juris- 102. PIC that case law from other dictions demonstrates that the circuit court's against improperly invites inconsistent outcomes argues the action. PIC that inconsistent outcomes re- possible main because the circuit court dismissed the prejudice codefendant insureds without and without a finding regarding negligent. whether the insureds were allege, PIC however, does not error in the circuit court's dismissing order the codefendants from the action. principally upon 103. PIC relies Frow v. De La Vega, (1872), contending 82 U.S. 552 that this risk of judg- inconsistent outcomes renders the circuit court's improper. ment Vega brought against Frow, De La alleging eight

Frow and thirteen other defendants, Frow) (including jointly of the defendants had con- spired Vega. to defraud De La Frow's codefendants

61 See, Pool, (Nev. 1980) ("It e.g., Paul v. 605 P.2d was ... error for the district court to enter a default appellant, parte hear ex evidence and enter judgment."). timely, trial court not. The but Frow did

answered against Frow. The action a final decree entered proceeded was re- however, codefendants, Frow's Vega in of and favor of De La the disfavor solved to Frow's codefendants. Supreme held Court

¶ States The United make a final trial court to error for the that it was proceeded against unde- while the cause Frow decree against The Frow Court codefendants. Frow's termined procedure explained risked that the circuit court's that sustaining might of the court be one decree "there charge joint defendants; and committed of fraud charge, disaffirming and declar- the said decree another dismissing entirely ing unfounded, and it to be complainant's such a re- Court denounced bill."62 interpreted "unseemly in Frow is and absurd."63 as sult proposition ways.64 for the It can stand number of 62 (1872). 552, 82 U.S. Vega, v. De La Frow 63Id. scope of Frow's disagree about the appear to Courts to its facts havе limited Frow courts

application. Some liability alleged is in which the to cases apply refused to Frow See, v. Rio Westinghouse Corp. Elec. e.g., joint and several. both 1980) ("To (7th extent Ltd., Cir. 617 F.2d Algom adjudica cannot be inconsistent holds that there [Frow] controversy in this single to a res joint or as tions as to Frow to a good apply law. But to case remains equity ancient case apply that venerable joint claim of and several .") (footnotes . . was never intended. for which it to a context omitted). suggested application that Frow's have Other courts of the relief in which the nature limited to situations may be against one grant relief impossible makes demanded See, e.g., against others. granting relief defendant without also (D.C. 1986) Columbia, 116, 137 Cir. 795 F.2d District Carter v. ("The solely on the fact that holding did not 'rest Frow responded to importantly, more Frow liability alleged joint'; was if at trial a defendant is exonerated and if defaulting codefendant's liability depends on the liabil- former, of the ity the plaintiff cannot obtain a judgment from the latter defendant. that, From, 106. PIC argues like "a significant

possibility inconsistent outcomes" remains in the present case.65 We disagree with PIC. The outcome for (a it) PIC for damages the out- (dismissal come for PIC's codefendant insureds them with no finding liability) are not necessarily inconsistent. PIC has not sought review of the dismissal. Liability may be imposed "upon the insurer irrespective of whether there is a final judg- ment against the insured."66 107. From is not on in the point instant case. From,

Unlike in in cause the present case did not proceed against non-defaulting defendants. The circuit court dismissed all codefendants from the action and reality plaintiffs relief, '[u]nder demand for it was necessary judgment be entered all of the defen- effective.'") (footnotes omitted). in dants order to be At the time, leading same treatise states that the applies From rule in alleged liability cases where the joint is both and several and likely may that the rule be extended scope. even further in its Wright al., See 10A Charles Alan et Federal Practice and (1998) ("[T]he § developed Procedure rule in the Froto case applies joint when the probably and several [but] can extended be to situations in which severаl defendants have defenses."). closely Frow, related For another view of see 10 al., 55.36[2, James Wm. Moore et Moore's Federal Practice at (3d 2007). 55-67 55-70 ed. rev. 65See Opening Appendix Brief and Defendant-Appellant- Physicians Wisconsin, Petitioner Company Insurance Inc. at 30-33.

66Loy, 2d 107 Wis. at 421.

accepted plaintiffs refile the action covenant not to applicable period. limitations within apply, ¶ Moreover, if did the rule even Frow be of no avail to PIC. Under stated therein would participate any in further rule, Frow PIC could not might proceedings that this court order on remand. as stated the effect of Frow's default defaulting Frow Court merely "The defendant has lost his follows: standing in court. He will not be entitled service of any way. appear cause, in in it in He notices nor to evidence, he cannot be heard at the final can adduce no hearing... ."67 presents rule thus the same 109. The Frow Unsurpris-

problem rule does. for PIC that the Florida rely upon deciding ingly, the Florida courts Frow regarding defaulting their cases defendants.68 Without any proceedings participation in further in the PIC's proceedings court, circuit there can be no further present. be because no defendants would support posi- sum, Frow does not PIC's the circuit court's in error. Frow tion that was position party may, that a contradicts defendant's despite participate default, its continue to the action.

E argument public policy ¶ 111. final is that PIC's support limiting, law, as a matter of considerations of unconditional effect of PIC's default to an admission coverage. argues PIC that as a matter of law the circuit a lesser sanction than court should have considered monetary judgment, sanction, default such as a under present case. circumstances 67 added). Frow, (emphasis 82 U.S. at 552 68 Days Acquisition Corp., See Inns 707 So. 2d at 749-51.

128 Conflicting public policy ¶ 112. considerations procedural requiring responsive that underlie our rule timely procedural pleadings served and our rule be authorizing impose a circuit courts "to serious sanction timely failure serve" an answer.69 On the one for prompt proceedings important. hand, are On the other litigants day hand, court; should have their in judgments are disfavored. conflicting public policies

¶ 113. These are set Sentry Co., forth in Hedtcke v. 2d Insurance 109 Wis. (1982). 469, 461, 326 N.W.2d727 explained ¶ 114. We in Hedtcke that a circuit grants enlarge court a motion to the time in which to grounds if non- answer compliance the court "finds reasonable (which statutory period with time neglect) statute and this court refer to as excusable justice if the interests of would be served enlargement e.g., party seeking time, of that an enlargement good of time has acted in faith and that the prejudiced by delay."70 opposing party the time is not analysis. ¶ 115. PIC does not fit into the Hedtcke agrees step PIC that ‍‌​​​‌​​​​​‌‌​​​‌‌‌​‌‌​​​‌​​‌‌​‌​​‌‌​‌‌​​‌‌​‌‌‌‌‌‍it does not fit into the first set namely Hedtcke, failure answer forth its neglect. Thus PIC is was result excusable part analysis, fit not able to into second Hedtcke's pertaining justice," requires to the "interests of apply conflicting public policies circuit court to the facts of the case before it.71 The Hedtcke court 69 Hardwoods, Split 2d Rock 253 Wis. 70 Co., 461, 468, Sentry v. 2d Hedtcke Ins. 109 Wis. omitted). (1982) (citations N.W.2d considering whether the Hedtcke court stated that time, justice enlargement interests of would he served an party's society's circuit court ... be aware of the "the should enlargement [for "If the motion of the stated as follows: expiration answer] of in to is made after time which enlarging specified the time for time, an order finding performing act must be based on a of an neglect; the circuit court determines excusable when neglect, the motion must be no excusable that there is denied."72 dispute in of 116. PIC does not that the absence deny finding neglect, a excusable circuit court shall

a enlarge in to the time which to a defendant's motion argue the circuit court PIC does not that after answer. enlarge in motion to the time has denied a defendant's required circuit court is still answer, which to weigh policy prior granting a motion considerations judgment against the defendant.73 for default adjudication probability that a prompt and the interest lawyer's neglect [public] policy which excused or tolerated delay litigation quality legal and lower the would foster Hedtcke, (quotation 2d at 469 marks representation." omitted). 109 Wis. time, recognized At the same the Hedtcke court also that cognizant that denial оf a motion for the circuit court "must be enlargement may to answer result in a default time plaintiff' "[t]he in favor of the and that law views reasonably prefers, whenever judgments with disfavor day in on the possible, litigants to afford court and a trial Hedtcke, (quotation 2d issues." 109 Wis. at 469 marks omitted). citation (Rule) Hedtcke, 2d See 109 Wis. at 468. also Wis. Stat. 801.15(2)(a) if (providing part in relevant a motion perform time in an act "is made enlargement of the which time, granted be expiration specified after the it shall not result of the court finds that the failure to act was the unless added). neglect.") (emphasis excusable made, however, argument party in a third This latter by the Wisconsin Insurance Alliance brief filed with this court argue words, PIC does not other stage failing make, at court erred some the circuit discretionary regarding process, determination a judgment against consistent a default PIC is whether justice. public policy or with the interests of with sound argument is that this court should hold Rather, PIC's altogether precluded as a that the circuit court was judgment rendering matter of law from a default serving damages against a late PIC for answer when prejudice. plaintiff has not shown ¶ that the circuit court's 118. We cannot conclude judgment against PIC is inconsistent with default policy PIC has caused its own sound as a matter of law. neglect. problems excusable its default without agrees ¶ PIC in this court that it failed to against alleging timely complaint it answer liability; it has excuse for its defendant's direct no complaint timely; failure and that to answer irreparably in default with no answer before the circuit circumstances, we cannot hold that court. Under these awarding judgment dam- the circuit court's of default public ages against PIC is inconsistent with sound policy conclude that the as a matter of law. We cannot gives weight present undue to the result in the case adjudication policy promoting prompt or insufficient affording litigants day weight policy a in court reasonably possible. whenever forth, 120. For the reasons set we conclude denying timely of the codefendant insureds answer Casualty of America. The Property Insurers Association required circuit court is party

third brief contends that a justice granting a motion for prior the interests of consider Non-Party Brief judgment by default. See of the Wisconsin Casualty Insurers Associa- Property Alliance and the Insurance of America at 9. tion preclude judg- defendants did not of all damages against

ment default the defendant for acknowledged upon default. its

v $ % ^[*] of the court of 121. We affirm the decision affirming appeals the circuit court's default damages. PIC for We conclude that the circuit rendering not err as a matter of law court did judgment by plaintiffs PIC for the damages. determine, as did the circuit court and We appeals, court of that the answer of codefen- denying liability of all did dant insureds defendants judgment by preclude a default PIC on the not damages upon and the PIC's acknowl- issue of edged acknowledged that PIC's judgment by default default. We hold subjected PIC to a for the damages against plaintiffs it. Accordingly,

¶ 122. affirm the decision of the we appeals affirming part reversing part court of in in circuit court. By appeals the Court.—The decision of the court of is affirmed. ROGGENSACK, DRAKE J. 123. PATIENCE (PIC)

{dissenting). Physicians Company Insurance provide liability damages contracted to insurance for malpractice. that its insureds caused medical majority opinion appeals' affirms the court conclu- statutorily that PIC's failure sion to answer within prescribed following time results conclusive (1) findings: negligent; factual PIC's insureds were (2) negligence plain- PIC's insureds' was causal of damages.1 insureds, tiffs' in their answer PIC's complaint, their conduct was denied that amended plain- negligent conduct caused that their and denied joined damages, fact those issues of denials which tiffs' proven false. Under the been stricken or and have not (2005-06),2 § 632.24 statute, Wis. Stat. direct conduct was its insureds' liable unless PIC cannot be negligent damages. plaintiffs' Kranzush and a cause Badger 56, 75, 307 Co., 103 Wis. 2d Mut. Cas. v. State (1981). be Therefore, matter should N.W.2d litigate contested circuit court returned to the relating questions conduct. to PIC's insureds' factual majority opinion disconnects PIC's Because the legislative contrary to the conduct from the insureds' respectfully dissent. directive, I

I. BACKGROUND gave Undisputed rise to a default facts that fully judgment being out in PIC are set entered majority opinion; them therefore, I will not review provide Briefly, any PIC contracted detail. here M.D., Terrance J. Folkestad, Charles L. insurance to System Mayo Health Cedar Witt, M.D. and Red Clinic— insureds). (hereinafter, sued for The insureds were provision negligence to Dale of medical services in the shortly was com- after this action Otto, died who menced. com- named in the amended first 125. PIC was alleged was

plaint, A default insurer. as an attorney although filed its because, PIC entered complaint in insureds for the amended an answer 1 43, Majority op., ¶¶ are to the Wisconsin Statutes references to All further noted. version, otherwise unless 2005-06 malpractice this PIC, action and raised defenses for through error, not scrivener's he did name PIC as a party provided representation. for whom he year litigation

¶ 126. After almost of in which attorney participated negotiations for PIC in discov- and ery preparation plaintiffs in trial, discovered the judgment against scrivener's error and moved for default granted plaintiffs' PIC. The circuit court motion.3 question presented ¶ 127. The here in is whether litigation scope direct action an in insurer's default failing timely findings answer includes conclusive negligent negligence the insureds were their plaintiffs' damages, though caused even the insureds negligently provided denied that medical care was plaintiffs' damages. denied that their conduct caused ¶ 128. circuit The court concluded that because of statute, the direct 632.24, Wis. PIC's de- Stat. fault negligent resulted admissions that were insureds negligence

and that the insureds' caused plaintiffs damages. appeals, The court reliance on § 632.24, affirmed circuit court's Otto conclusion. v. Physicians slip Wis., Inc., 2006AP1566, Ins. Co. No. (Wis. 2007). op., App. ¶¶ majority 23, Jul. opinion affirms as well.

II. DISCUSSION A. Standard of Review Although party

¶ 129. whether to hold a in de discretionary fault for failure to answer is a court, Connor, decision of the circuit Connor v. 2001 WI 3Although the circuit grant judg court's decision ment under the very PIC circumstances of this case troubling me, brought that issue was not to us for review. ¶¶ 182, 279, 243 Wis. 2d 627 N.W.2d we are 49, 17-18, discretionary reviewing Rather, here. decision not application interpretation of this case turns on the and § 632.24, action statute. Stat. known as direct Wis. statutory interpretation questions of and We review benefiting independently, application from the dis but appeals of circuit of cоurt and the court. cussions Sys., Regents v. the Univ. Wis. Marder Bd. of of of ¶ 252, 19, 286 Wis. 2d 706 N.W.2d WI Liability PIC's B. Potential through plaintiffs

¶ 130. PIC can be liable to (1) solely by its virtue of contract mechanisms: two (2) through of its insureds, or the combination with statute, the direct action Wis. Stat. contract and § 632.24.

1. PIC's contract requires ¶ to of insurance 131. PIC's contract damages legally only pay its are insureds those neg- obligated pay.4 Here, to the insureds have denied damages. They plaintiffs' ligence have of causation accordingly, they are action; from dismissed this been plaintiffs. obligated pay nothing legally There- purely basis, has no contractual PIC fore, on damages. anyone plaintiffs' 2. Direct action appeals of and the court 132. The circuit court of PIC's on

rested their determinations Answer, averred "that its Amended PIC ... limited the terms conditions coverage [was] extent part However, policy not policy." the actual [its] record before us. § majority

direct statute, Wis. Stat. 632.24. The opinion § necessary compo- also relies on 632.24 aas liability.5 nent Indeed, to PIC's since the insureds have plaintiffs, not been determined to be liable to the only developed against basis on which can be PIC is under the direct action statute. Under direct negligent action, if the insureds' conduct caused the plaintiffs' damages, plaintiffs can obtain a directly against damages. Kranzush, PIC for those 103 Wis. 2d at 75. majority opinion spends

¶ 133. The no time ex- § plaining stage how Wis. Stat. 632.24 sets the for PIC's liability, proving stipulating without or the in- negligent negligence sureds were and that their caused plaintiffs' damages. majority opinion's failure to apply plain meaning § of 632.24 leads it to errone- ously plaintiffs' conclude that PIC is liable for the damages, notwithstanding imposed the conditions on the insurer's under 632.24 and the denials of fault in the answers of the insureds. Statutory interpretation's general principles

a. "[Statutory interpretation 'begins ¶ 134. with the language meaning of the statute. If the of the statute is plain, ordinarily stop inquiry.'" we State ex rel. County, Kalal v. Circuit Court Dane 58, 2004 WI ¶ (quoting 45, 633, 271 Wis. 2d 681 N.W.2d110 Seider O'Connell, ¶ v. 76, 43, 2000 WI 211, 236 Wis. 2d 659). meaning may N.W.2d Plain be ascertained not only employed from the statute, words in the but also statutory interpret ¶ from Id., context. 46. We do not statutory language in isolation, rather, but as that

5 Majority op., ¶ surrounding language aрpears in or related relation reasonably, unreason- statutes, to avoid absurd or able results. Id. statutory history,

¶ i.e., the Context includes currently being previous exam of the statute versions Badger Co., 52, Ins. v. Mut. 2008 WI ined. Richards (citing Kalal, 749 N.W.2d 2d_, 22,_Wis. 69). history "Statutory encompasses Wis. 2d provisions previously repealed of a stat enacted and By analyzing changes legislature has ute." Id. may years, more made over the course of several we meaning easily also of a statute. Id. We discern legislature interpretation presume meant an statutory purpose. will advance statute 2d Wis., Inc. v. Pub. Comm'n 176 Wis. GTE N. Serv. of (1993). 559, N.W.2d284 566, 500 "capable being ¶ understood If a statute is persons reasonably in two or more well-informed may ambiguous, we senses[,]" then the statute is meaning. comprehend its consult extrinsic sources to ¶¶ 47-48, 2d have also Kalal, 271 Wis. 50. We statutory history plain mean- to confirm the consulted ing Id., ¶ 51. of a statute. § Stat. 632.24

b. Wisconsin statutory interpretation with 137. As all language begin my application, I discussion with the § 632.24, Wis. Here we review Stat. statute. provides: It current direct action statute. Wisconsin's liability to policy Any covering bond or of insurance liable, up to the negligence makes the insurer others for policy, persons or amounts stated the bond death of against to recover the insured for the entitled persons property, or irre- any person injury or for spective presently of whether the is established contingent or is and to become fixed or certain final judgment against the insured. added.)

(Emphasis Section 632.24 not does make an directly to all insurer liable who to sue choose an § company. provides pnly Rather, insurance 632.24 con- liability, ditional wherein an insurer is liable to all who against are entitled to recover the insured for the negligence. imposed by insured's condition unambiguous. direct action statute clear and is Section plainly impose liability 632.24 means to on an insurer only if the claimant "entitled to recover insured" the insured's conduct that underlies the direct action insurer. Section 632.24 is not a statutory strict statute. An examination of the history supports my places conclusion because necessary current statute in context and confirms connection between an insured's conduct and direct liability of the insurer. injured providing A direct action statute

parties right directly compa- with sue insurance nies first was enacted in 1925 as Wis. Stat. 85.25 (1925). part At that time, direct action was of the "Law applied only [the] Road" and to motor vehicle acci- provided: dents. It insurance, liability

Accident Any of insurer. bond or of policy covering insurance liability by to others reason operation of the of a motor vehicle shall deemed be and to following construed contain the conditions: That the insurer shall be to persons liable the entitled to any the person, injury recover death or for of person property, by or negligent operation, caused the maintenance, use or construction the vehicle defective of therein, liability described such not exceed the named in policy. amount said or bond

138 added.) on the (Emphasis conditioned Direct action was being the negligent a cause of conduct insured's damages. claimant's interpreted Wis. Stat. decisions, which 139. Our (1925) shortly

§ enacted, considered it was after 85.25 negligent operation motor of a in the context statutory right of direct the construe We did not vehicle. provisions; rather, superior but to contractual as action timing of permitted on the limitations contractual we provision in right if an is, That a action. of direct against precluded policy the insurance suit insurance liability had been company its insured until dispositive. provision See, that was determined, we held 224 e.g., Morgan 298, 300, 220 N.W. Hunt, 196 Wis. v. (1925) (1928) § (concluding "does not create 85.25 any right none of action where or confer a itself'); policy Bro see also terms of the under the exists Co., 293, 295-96, 194 Wis. Ins. Accident v. Standard (1925) (1927) § (concluding "does 85.25 N.W. 431 against right plaintiff give action not company. exists under none . . where insurance itself'). policy terms of (1925) § was Stat. 85.25 140. Wisconsin Stat. 85.93 as Wis. re-numbered

amended and litigant had that a amendment clarified The before, right as well an insurer of direct to be determined conduct was after, the insured's as legis damages. plaintiffs negligent a cause of "irrespective adding phrase, lature did so contingent praesenti or in be such whether final fixed or certain become Angst, Frye v. action statute. the direct insured" to (1965). 575, 578, 2d 137 N.W.2d Wis. reсov-

legislature that could be limited the amount also company policy's ered from an insurance limits. (1929) provided: Section 85.93 insurance, liability Any Accident of insurer. bond or policy covering liability of insurance by to others reason operation the of a motor vehicle shall be deemed and construed to contain following conditions: That the insurer persons shall be liable to the entitled to recover any person, for the death of injury or for person property, or irrespective of whether such liabil- ity in praesenti contingent be or and to become fixed or insured, by certain final when negligent caused operation, maintenance, use or defective construction of the therein, vehicle described such is not to exceed the amount named in said bond policy. or added.)

(Emphasis change The amendments did not impose condition that direct action continued to on the potential liability of carriers, insurance i.e., that negligent insured's conduct awas cause of the (1929) damages. claimant's Section 85.93 remained unchanged 1957, until when it was renumbered as Wis. 204.30(4). Stat. interpreted 141. Decisions that the 1957 ver- explained statutory

sion of the direct action statute changes up point example, Frye, to that in time. For explained we 1929 the statute was amended to provide permitted that direct action was even before of the insured had determined, been thereby abrogating Morgan Frye, and Bro.6 28 Wis. 2d Ohm, Chief, explained in that direct action set out at 579. We also 204.30(4) (1957) right, § awas substantive Wis. Stat. 260.11(1) (1957) necessary § a Stat. was but Wis. procedural component of direct action that determined subject given be to direct action a insurer could whether Id. in the first instance. Frye together

¶ in drew what 142. Our discussion by compar legislature meant enact believed the to we ing legislative amendments of direct action statutes contemporaneous However, in court decisions. with '[mjaintenance1 Frye, that" of an automo we also held operation, part a or of has been considered bile never accordingly, management control," 582, id. at negligent did not meet claim for maintenance necessary parameters procedural in Stat. set out Wis. 260.11(1) (1957) § permit actiоn, id. at 583. to direct target quite Apparently, were not on we legislature regard in to that conclusion with the with legislature again Frye 1967, amended the because by "[when] added, statute. It caused direct action negligent operation, management, mainte- control, nance, a motor or defective construction of vehicle" use 260.11(1) added) (1967), § (emphasis to Wis. Stat. provi- thereby making procedural and substantive regard of direct action coextensive sions each covered. conduct legislature significant made 204.30(4) wherein it removed to Wis. Stat.

revisions "neg- and substituted references to "motor vehicle" broadening scope ligence," thereby of direct action impose potential carri- on insurance to injuries or death to "those entitled to recover" for ers liability of carrier until the direct action the insurance been determined. the insured has

caused by "negligence," whether a motor vehicle was involved or not. The 1971 version of the direct action statute, § 204.30(4), provided:

Liability Any policy insurer. bond or of insurance covering liability negligence others reason of shall be deemed and following construed contain the con- ditions: That the persons insurer shall be liable to the any entitled to recover for the death of person, or for injury person property, or irrespective of whether such praesenti be in contingent or and to become fixed insured, or certain final against the by when negligence, liability caused such not to exceed the amount named in policy. right said bond or given against direct action herein an insurer shall exist policy whether or not the or contract of insurance provision forbidding contains a such direct action. added.) (Emphasis The amendments did not change condition that direct action continued to on the impose potential liability insurance carriers: insured's conduct negligent was a cause of the claimant's damages. 204.30(4) In § 145. Wis. Stat.

¶ was re- pealed and the substantive of direct provision action (1975). § was recreated as Wis. Stat. 632.24 It provided: Direct Any insurer. policy bond or covering liability insurance negligence to others for liable, makes the up insurer to the amounts stated in the policy, persons bond or to the entitled to recover against the insured for the any person injury death of or for to persons property, or irrespective of liability whether the presently is contingent established or is and to become fixed or judgment against certain final the insured. added.) (Emphasis The amendments did not change condition that direct action continued to impose on the liability potential of insurance carriers: negligent insured's conduct was cause of claimant's damages. Kranzush, In we examined Wis. Stat. (1975)

§ light of a claimed bad faith refusal 632.24 injured party. Kranzush, 103 2d settle made Wis. § began by noting that 632.24 does not create at 57. We subject companies for the insurance to its strict explained, provisions. "it is obvious that Id. at 66. We creating these statutes fall far short of the no-fault compen- compensatory scheme embodied in the worker's into a sation statutes. ... The claimant is not locked legislatively bargain whereby recovery,though bis driven upon contingent in a smaller, is not his success lawsuit." Id. at 66-67. (1975), parsing Wis. Stat. 632.24 we up policy [is] "an limits to 'the

said that insurer liable persons at entitled to recover the insured'" Id. added).7 significance (emphasis Of case now explained in that "it is clear us, we also Kranzush before language from the of the statute that exposed predicated upon which the insurer is liability explained [hin- further," Id. of the insured." We right the claimant has a of action der this section against only to the extent that he has the the insurer negli- against right the insured for his same of action gence." Id. holding substantive 148. law that the Wisconsin

liability an under Wisconsin's direct action insurer being predicated conduct is on the insured's statute 7 i.e., liability, upon it rests condition on the insurer's This against having right to recover the insurer the claimant conduct, in the direct action statute since the insured's has been (1925). § 85.23 first enacted. See Wis. Stat. 1925 when was negligent damages and a cause of the claimant's has years. example, been settled for more than 60 For in Kujawa Indemnity Co., v. American 361, 245 Wis. (1944), N.W.2d31 we reviewed the direct action statute (1929), place, light in then Wis. Stat. 85.93 of a against direct action the insurer where the insured was joined against not in the action. Id. at Indemnity American was commenced before the statute against insured; of limitations had run on the claim against Indemnity however, before the action American concluded, was the statute of limitations ran on claims against Indemnity the insured. Id. at 362. American explained moved to dismiss. Id. We that since its enactment, the direct action statute "makes the insur company directly persons ance liable 'to the entitled to any person, injury recover for the death of or for person property, negligent opera or caused irrespective liability tion . . . of whether such be in praesenti contingent or and to become fixed or certain judgment against final the insured." Id. at 363. We that, reasoned because the statute of limitations had against Kujawa's not run claim the insured Indemnity when the action American was com preclude menced, the statute of limitations did not continuation of that action. See id. at 366. interpreting the direct action statutes in Kujawa, explained "[i]t quite impossible we is [secs. 260.11] read into the statutes 85.93 and an intent part to create a on the of the insurance carrier completely dissociated from of the insured." added).8 (emphasis "[t]here Id. at 365 said, We 8 Ignoring strong language Kujawa v. American Co., Indemnity (1944), 245 Wis. N.W.2d 31 that abso lutely connects the conduct of the insured to the question nothing negative in it to the idea that the insurer is not any is, or that under liable unless the assured defense liability policy that relieves the insurer from as liability against relieves it from as the assured also against injured persons. statute, As to the it does not liability against (emphasis create the insurer." Id. at added). Accordingly, negligent concluded that con- wé necessary component duct an insured was a against maintaining an Id. at a direct action insurer. Huber, v. 150. Wiechmann Wis. (1933), N.W. 112 we also examined whether lawsuit against an insurer lie under the direct action would statute when the lawsuit had not been commenced plaintiffs against claim the insured had before plaintiff argued Stat. abated. The that because Wis. (1929) gave right against it a of direct action 85.93 longer plaintiff insurer, the fact that could no disposi- ‍‌​​​‌​​​​​‌‌​​​‌‌‌​‌‌​​​‌​​‌‌​‌​​‌‌​‌‌​​‌‌​‌‌‌‌‌‍ was not maintain an action insured disagreed. concluding Id. Id. at 336. In tive. at 335. We brought against the insurer that no aсtion could be expired, after the claim the insured had we quite impossible explained, "It is to read into the part on the of the statutes an intent to create the claimant under the direct whether the insurer is liable to statute, majority Kujawa opinion tries to show that disconnecting the insured's conduct supports position its It does majority op., insurer. See 37-39. ¶¶ from may by saying "under certain circumstances" insurer so Majority op., when the insured is not. be liable even However, may the insured is the insurer be liable when whether question question presented this lawsuit. not is not may proving without here is whether the insurer be liable plaintiffs' negligent was and a cause the insured's conduct damages. completely

insurance carrier dissociated from the liabil- ity the insured." Id. at 336. Tierney

¶ Lacenski, In 151. v. 114 Wis. 2d (Ct. 1983), App. appeals 338 N.W.2d 320 the court of against was asked to decide whether a direct action the (1975) § insurer would lie under Wis. Stat. 632.24 when plaintiff statutorily required the did not serve notice precluded any against of claim. Plaintiffs failure action concluding the insured. Id. at 303-04. that no direct against action could be maintained insurer, we said: statute, Even under the 632.24, Stats., direct action sec. which up policy makes an insurer liable to the limits "the persons entitled to against recover the insured for any person injury death of or for person or property," it is clear from the statutory language that liability to which the exposed insurer is predi- upon cated liability. section, insured's Under this right claimant has a the insurer only to the extent that he right has the same of action against the negligence. insured for his (citation omitted). Id. at 303-04 My statutory history review of the of Wis. Stat. 632.24 and the cases that have construed the changing form of Wisconsin's direct action statutes uncovers a consistent theme: of an insurer sued under direct action is tied to and conditioned on a finding negligent that the insured's conduct awas cause plaintiffs damages. This is so because from the beginning action, direct the direct action statutes have conditioned insurer, i.e., of an direct only "persons action "makes an insurer liable" en titled to recover Kranzush, the insured." 103 Kujawa, 2d 75; Wis. at see also 364; Wis. at Wiech Barstad, mann, v. 2d Biggart 336; Wis. 211 Wis. at (Ct. Tierney, 1994); 421, 428, App. 513 N.W.2d 681 Wis. 2d at 304-05. This conclusion is also consistеnt with statute, wherein recovery of the direct action

purposes the nature of the conduct of is conditioned on insured. Those are: purposes by determin- litigation expense and reduce the

[to] save single in a action which is ing rights parties of all expedite usually by [To] insurance carrier. defended litigation payment the final the final settlement of and recovery. injured person, [To] if he be entitled to carrier who has place upon the burden the insurance liability pay in for its compensated been advance injuries person and dam- damage assessed for such age have been caused actionable property as insured. negligence part person on the of the Fund v. Whyte Income & Monthly Appreciation Decade's Hirschboeck, S.C., & 665, 675, 495 N.W.2d 173 Wis. 2d (1993) Inter-State Ex Ducommun v. (quoting 335 (1927)). 212 289 change, 193 Wis. 179, 185, N.W. that recognizes 154. The majority opinion

¶ to the conduct of of the insurer is tied liability insured, as evidenced its statement: course, is, dependent upon liability

An of insurer's insured, the insurer's is the conduct of its but liability. necessarily the insured's dependent not on unless the recovery There can be no the insurer giving proven.9 rise to insured's conduct the law. those statements I with agree completely stated However, majority correctly has the no sooner discussion, law, ignores in the same when majority opinion). in Majority op., (emphasis 35¶ that, and concludes notwith- conduct insureds standing proven conduct has that the insureds' not been damages, negligent plaintiffs' to be or a cause of PIC is liable.10 majority opinion

¶ result, the 155. To reach its heavily Loy relies on its reconstruction of our decision (1982).11 Bunderson, v. 107 Wis. 2d 320 N.W.2d175 majority selectively, taking opinion applies Loy The implying it and those various statements from support statements its conclusion that PIC is liable negligent proving without that the insureds were negligence plaintiffs' that damages.12 their was cause of entirety, Loy supports

However, read its this dissent's conclusion that PIC cannot be liable to the plaintiffs plaintiffs prove

until the insureds' negligent plaintiffs' conduct was and a cause of the damages. Loy question

¶ 156. involved whether "special Casualty insured, release" General its 10Majority op., 11Majority op., Bunderson, majority opinion quotes Loy v. " 400, (1982), saying 'responsi 2dWis. 320 N.W.2d 175 as that bility company injured party anof insurance to an is derivative conduct,... of the insured's is not derivative status personal liability plaintiff,'" majority op., the insured's to a " 36, 'upon irrespective the insurer of whether there is a insured,'" judgment against quotes final id. Those are correct, absolutely they support but do not the conclusion that PIC can be held liable when the insureds' conduct has not been proved negligent plaintiffs' injuries. to be causal liability statute does not create strict for the insured. The statutory liability conditions tie of the insurer to the insured's conduct such a "entitled" to recover claimant must be liability against imposed the insured before can be on the insurer.

Truesdill, was valid when it left Travelers Insurance subject to suit. Id. at 401-02. Under the terms of the Casualty paid upon release, $20,000 General $50,000 policy for its release. Id. at 402. Travelers remained subject policy to suit on $500,000 its for amounts $50,000 between and $500,000, as did Truesdill.13Id. at 402, release, 405. Under the Travelers continued to duty have a to defend Truesdill the claim that negligence plaintiffs damages. his caused the Id. at 403. parsing

¶ 157. the direct statute, Wis. (1975), explained "[t]he Stat. 632.24 we insur company liability injured party ance has a direct to an if trigger company liability." other insurance Id. at factors added). (emphasis explained We further that "it is the nature of the insured's conduct and its conse quences company with which an insurance is con expressing necessary cerned." Id. at 422. In nexus between the insured's conduct and the insurer's direct liability injured party, quoted we Nichols v. Fidelity Guaranty Co., United States & 13 Wis. 2d (1961): 109 N.W.2d 131

The fact that a party third can sue an insurer of a motor vehicle direct. . . without recovering judg- first defendant, ment enlarge insured does not coverage policy afforded such or determine the insurer's thereunder.

Loy, (quoting Nichols, 107 Wis. 2d at 13 Wis. 2d at 499). up We summed our conclusions about the rela- tionship poten- between insured's conduct and the tial of the insurer under the direct action statute as follows:

13In the Casualty policy, absence of the General Travelers provided Insurance would coverage. Loy, have "dollar-one" Therefore, Wis. 2d at 404. "special it benefited from the release." if the directly plaintiff liable to An insurer is the negligence al- underlying of are satisfied conditions aсtion, of the insured though, after commencement the not to by or an absolute covenant protected is released company of to an responsibility an insurance sue. conduct, of the but injured party is derivative insured's per- not of the status of the insured's it is derivative plaintiff at the time the insurer's sonal to a judgment for triggered by are obligations contractual damages. reasoning Accordingly, at 426. the conclusions

Id. notwithstanding my Loy that, reaffirm conclusion statute, PIC held liable to direct action cannot be proved plaintiffs of insureds is until the conduct plaintiffs' damages. negligent a cause of to be pur- requiring proof addition, of those facts furthers requiring pose i.e., statute, action direct by pay damages "as have caused insurer to been action- part person negligence of insured." able on the (quoting Monthly Income, 173 Wis. 2d at 675 Decade's 185). Ducommun, 193 Wis. at majority opinion, However, here, the years, detaches the first time in more than obligation from conduct of insured purposes the direct insurer. None of the interpretation this of Wis. statute is furthered Stat. opinion accomplishes majority id. The this 632.24. See any coup grace asserting, authority, de without cited necessary corollary "A of the insurer's direct may injured complainant is that the insurer admit an allegation liability, underlying as as the an allegation its well insured."14

of the tortious conduct of its One only plays if wonder how this assertion out an can that the conduct insurer were admit insured's was 14 Majority op.,

negligent damages, and a cause of the claimant's but policy lapsed. also asserts that the has ¶ 159. Furthermore, there are collateral conse- quences professions for members of certain who have provided negli- been determined to have services in a gent thereby causing injury. manner, Such an admission negligence may consequences result in in addition to paying damages.15 finally, impor- And and of utmost tance in us, the case before the insureds have denied they negligently provided medical care to Dale plaintiffs' Otto and that their care was a cause of damages. accept Therefore, even if one were to the bold majority opinion, assertiоn of the I not, which do it has application no here. majority obligation 160. The also relies on PIC's 802.02(4) §

under Wis. Stat. to answer the amended complaint.16 quarrel I have no with the assertion that complaint. PIC must answer the amended However, its timely negate failure to answer does not the answers regard that the insureds made in to their own conduct. example fallacy majority's An will show the of the 802.02(4) § reliance on for its assertion that PIC's negligence failure to answer admitted the negli- insureds who had denied that their conduct was gent. Suppose

¶ that three doctors and one nurse patient were sued for their treatment of a who dies subsequent surgery. deny All the doctors answer and negligence, but the nurse does not answer. Does the 753.30(4) See, e.g., Wis. Stat. (requiring "[t]he clerk of provide circuit court examining [to] the medical board with copy a ... of an order of a physician circuit court which a ... negligent is found in treating patient.").

16Majority op., 41-43. ¶¶ negligence? Of the doctors' default admit

nurse's for all of the nurse liable course, it does not. Is though damages patient she suffered even only post-operative provided course, not. Of she is care? liability. subject to direct The nurse is not way only Accordingly, can be that PIC permits the if the direct action statute liable here is separation from the insurer's the insured's conduct years liability. than However, held for more we have Kujawa, 364; at 245 Wis. does not do so. that it Wiechmann, 211 at 336. Wis. majority opinion

¶ relies on Martin also 163. The (Ct. App. 2d 344 N.W.2d 206 117 Wis. Griffin, v. overruling years 1984), justify of its in its efforts uniformly precedent that under the direct has held that liability tied to the statute, the insurer's is because Martin is of no assistance insured's conduct.17 upon appeals issue did not address the the court of us turns. the case now before which appeals ¶ Martin, of examined In the court 164. timely a answer Mutual to file the failure of Milbank for the direct action statute it sued under when was alleged negligence operating a motor ve- Griffin's noting began by that whether to It hicle. Id. at 440. discretionary grant determina- default 442. It then examined the circuit court. Id. at tion of reasoning that the circuit and concluded circuit court's granting by Martin a discretion court "did not abuse its judgment." speaking In to the issue of Id. at 444. "By failing liability, to file a said, the court dеnial, admitted the uncondi- Milbank has answer of policy allegation for covered Griffin that its tioned negligence." damages Id. caused his for 17Majority op., 60-73. ¶¶ appeals

However, the of court did not address the question of whether Milbank's default in an resulted negligent. simply that admission Griffin was It assumed responsible that once Milbank defaulted, was for negligence negligence Griffin's because had al- been leged. Id. majority opinion asserts the court appeals' conclusion Martin should control the extent,

outcome this case.18 some To there are parallels in the cases, facts between two and PIC deny does not that its default in a resulted conclusive finding damages that it is liable caused negligence beyond However, its insureds. con- holdings clusion, the in Martin do not address the question critical is, here. That whether PIC's failure negligently provided answer admitted that the insureds negligence medical care to Dale Otto and whether that damages, plaintiffs' though was a cause of even allegations insureds denied have those their denials not been stricken. impose its effort to strict on opinion majority

PIC, the to enlist the seeks judgment majority statute, Wis. Stat. 806.02. The opinion regard judgments, in asserts that to default ordinary "[t]he allegations rule is that a com- plaint 'are when of a admitted not denied' the answer against allegations defendant I whom the are made."19 disagree do support holding statement, not with that it not but does plaintiffs. liable

PIC There was allegation provided negligent no that PIC medical care. alleged By contrast, That was it the insureds. alleged PIC, was that

18Majority op., 67. ¶ 19Majority op., 42. ¶ times, effect, at all material

had in full force and Witt, Folkestad, Dr. covering Dr. policy of insurance negligence which is the alleged for the Red Cedar Clinic directly liable subject complaint, therefore of this and is damages."20 enumerated plaintiffs for the below proved agree to have that, if the insureds were I negligently provided that care to Dale Otto was medical plaintiffs' harm, then PIC's default of the a cause coverage provided for that conduct. admits that nothing in the default However, there is permits the claimed a court to assert that statute defеndant when of another a defendant jointly negligent been made. conduct have not claims of Holding ¶ more one liable for con- defendant complaint alleged against in a him serves than is duct long ago. purpose, In Pett as held v. no rational we (1856), Clark, it was error concluded that 5 Wis. 198 we judgment against two after defendants to enter default answered, without first defendants had one two striking Here, Id. the insureds' any answer. at 198-99. stricken, nor basis been has answer has not their answer been asserted. strike Haugen Wittkopf, 242 Wis. In v. (1943), pleading relation we examined N.W.2d Haugen, ship an an insured and the insurer. between assumption risk, of did raise the defense insurer not Id. at 281. We concluded even its insured did. but though did not so assert that "the answer the insurer indemnify host, and as the defense, its is to can be no not the insurer is not and there host is liable Haugen recovery against it." Id. at 281. fits well with all the insureds before us because the circumstances they negligently provided care to medical denied that Complaint, Amended 6. causing plaintiffs' damages. Dale the Therefore, Otto necessary prove the conduct that before there can against liability § be direct PIC under Wis. Stat. 632.24 unproven. remains jurisdictions

¶ 169. Other also have examined the liability effect of a default one defendant on the example, another defendant. For in Fred Chenoweth (Ga. Equipment Corp., Co. v. Oculus 328 S.E.2d 539 1985), Supreme Georgia the Court of examined the defendant, effect of alleged Oculus, who was equipment, to owe Chenoweth for materials and liability surety. on the of Oculus's Id. at 540. In deter- mining surety that the not on was liable based Oculus's actually default, the court that by reasoned there were two presented pleadings. causes of action the The cause against of action Oculus on was based breach of con- failing pay, against tract for the cause of action surety surety. was an action on the bond of the Id. Therefore, at 540-41. the court concluded that joint. two defendants not Id. was at 541. It also judgment against concluded that the default did Oculus not reach the merits of the breach of contract claim against However, it. Id. in order bond, to recover on noted court that the merits of the claim surety insured would have to be аddressed before payment. could be liable for Id. too, 170. Here there are two claims for relief: malpractice for medical

one and one on a contract provide malpractice. However, insurance medical plaintiffs' merits of the claims the insureds must litigated be before their direct action will meet necessary conditions for direct under Wis. Stat. joint PIC 632.24. and its insureds are not tortfeasors. Accordingly, majority opinion pro-

¶ 171. has ignoring years precedent vided no rationale for upon liability conditioned has direct action which made Thomas Fairchild insured. As Justice the conduct impossible quite Wiechmann, to read into "It said in is liability part on the to an intent create statutes completely from the dissociated carrier insurance Wiechmann, 211 Wis. at 336. of the insured." majority opinion years, the However, after more 60 do to so. chooses

III. CONCLUSION majority opinion the court of ¶-172. affirms The appeals' failure to answer within that PIC's conclusion following statutorily prescribed in the results time (1) findings: PIC's insureds were factual conclusive (2) negligence negligent; causal PIC's insureds' was plaintiffs' damages. insureds, in their answer PIC's complaint, was that their conduct denied amended plain- negligent their conduct caused and denied that joined damages, fact those issues of which denials tiffs' proven or false. Under and have not been stricken § 632.24, PIC cannot be statute, Wis. Stat. direct action negligent and a conduct was liable unless its insureds' damages. plaintiffs' Kranzush, 2d at 103 Wis. cause of should be returned to Therefore, 75. the matter questions litigate factual the contested circuit court to relating the ma- conduct.21 Because to PIC's insureds' jority opinion in- PIC's from the disconnects legislative contrary directive, I conduct, sureds' respectfully dissent. litigate ques majority questions how remand possible in because the about the insureds' conduct

tions However, Majority op., been dismissed. sureds have Kujawa, 245 Wis. at poses problem no a direct action. ¶ 173. I am authorized to state that Justices DAVID T. PROSSER and ANNETTE KINGSLAND join ZIEGLER ‍‌​​​‌​​​​​‌‌​​​‌‌‌​‌‌​​​‌​​‌‌​‌​​‌‌​‌‌​​‌‌​‌‌‌‌‌‍this dissent. notes Howard Legislative Reference Library, purpose reflect of the amendment was to change of Bro v. Standard Accident Insur interpretation Co., (1927) ance 293, 194 Wis. and Morgan v. 215 N.W. 431 Hunt, (1928). 196 Wis. 220 N.W. 224 Those cases had concluded that clauses in policies may prevent insurance

Case Details

Case Name: Estate of Otto v. Physicians Insurance Co. of Wisconsin, Inc.

Court Name: Wisconsin Supreme Court

Date Published: Jul 3, 2008

Citation: 751 N.W.2d 805

Docket Number: 2006AP1566

Court Abbreviation: Wis.