This case is an insurance dispute between Addison Insurance Company and West Bend Mutual Insurance Company. The dispute arose when an employee of Badger State Auto Auction, Inc. (BSAA) injured the plaintiffs while driving a vehicle it was preparing to auction off for Fairview Auto, Inc. Addison insures Fairview and West Bend insures BSAA.
¶ 2. The primary issue is whether Fairview's policy with Addison covered the accident. The circuit court concluded it did, resting in part on the conclusion that the BSAA driver was acting as Fairview's agent at the time of the accident. We reverse and conclude that the BSAA driver was not acting as Fairview's agent. Accordingly, Addison's policy did not cover the accident.
I. Background
¶ 3. This case comes before us on summary judgment; the material facts are not in dispute.
Fairview, BSAA, and the Accident
¶ 4. Fairview is a corporation owned and operated by Jeffrey Boe. Fairview's entire business consists of buying vehicles at auctions and selling them at other auctions for a profit. Fairview has long used BSAA to sell its cars. At the time of the accident, Fairview had a policy with Addison, and BSAA had a policy with West Bend.
¶ 5. On August 22, 2011, Fairview purchased a 2002 Ford Explorer from an auction in Schofield, Wisconsin. Fairview then arranged for the Explorer to be sold at BSAA's August 25, 2011 auction. Fairview had control over certain parts of the auction process, but most policies and procedures were dictated by BSAA. Regarding the sale itself, Fairview could instruct BSAA whether the vehicle was being sold "as is" or as "auction guaranteed." Instead of giving BSAA a minimum price, Boe would usually stand at the auction block and inform the auctioneer whether to sell the vehicle or not.
¶ 6. BSAA, as part of its normal services, drove the Ford Explorer from Fairview's place of business to BSAA's auction. At the auction house, BSAA would assign each vehicle a parking spot and a lane to travel in. BSAA also offered services such as detailing and repairing vehicles. Once a vehicle was on BSAA's auction site, potential buyers could request a test drive. When the auction began, a BSAA driver
¶ 7. On August 25, 2011, BSAA employee Francis Yeager was driving vehicles for that day's auction. He was the person tasked with driving Fairview's Ford Explorer into the auction house. While doing so, he struck plaintiff Benjamin Romero. Romero suffered severe injuries that resulted in the amputation of his right leg and part of his left hand. According to the complaints, plaintiffs George Rucharas and Kyle Witz also suffered injuries. At the time of the accident, Boe was inside the auction house waiting for his vehicles to enter so that he could take his place next to the auctioneer.
Addison's Policy
¶ 8. Addison's policy provided primary liability insurance for any covered auto
¶ 9. The Garage Coverage Form provides the default coverage under Addison's policy and applies unless modified by the Endorsement. It defines "Who Is An Insured" to include the policyholder and, with several exceptions, "[a]nyone else while using with your permission a covered 'auto' you own, hire or borrow." One of the exceptions to coverage is "[s]ome-one using a covered 'auto' while he or she is working in a business of selling, servicing, repairing, parking or storing 'autos' unless that business is your 'garage operations.' "
¶ 10. The Endorsement reads: "THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY." The Endorsement states that "[flor a covered 'auto' licensed or principally-garaged in, or 'garage operations' conducted in, Wisconsin, the coverage form is changed as follows." The original policy language remained operative "unless modified by the endorsement."
¶ 11. The Endorsement provided in pertinent part:
A. Changes In Liability Coverage
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2. If your business is selling, servicing, repairing or parking "autos", Who Is An Insured is changed to include anyone other than an officer, agent or "employee" of such business while using a covered "auto." However, that person is an "insured" only if he or she has no other valid and collectible insurance with at least the applicable minimum limit specified by Wis. Stat. [§]344.01(2)(am)....
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3. The following is added to Who Is An Insured:
Anyone else is an "insured" while using a covered "auto" you own with your or any adult "family member's" permission.2
¶ 12. Following the accident, Romero, Rucharas, and Witz each filed separate personal injury lawsuits stemming from their injuries. The three cases were consolidated into a single case for discovery and trial. Romero's claim was mediated and the parties eventually settled his claim for $5 million. Addison was kept informed of the settlement negotiations and refused to contribute to the settlement. West Bend paid the settlement and acquired Yeager and BSAA's rights under Fairview's policy with Addison.
¶ 13. West Bend then filed a cross-claim against Addison asserting that Yeager was an insured under Addison's policy. West Bend also maintained that Addison's policy was primary and that Addison breached its duty to indemnify by refusing to contribute to the settlement. Because of this alleged breach, West Bend claimed that it was entitled to reimbursement of $1 million — the limits of Addison's policy — plus the costs and attorneys' fees incurred in pursuing the claim against Addison. For its part, Addison denied that Yeager and BSAA were insureds under its policy. Both Addison and West Bend moved for summary judgment.
¶ 14. The circuit court granted West Bend's motion for summary judgment, finding that it did not make a difference whether section A.2 or A.3 of the Endorsement applied to the accident because Yeager and BSAA would be covered under either provision. It concluded that section A.2 excepted agents from its limitations on coverage, and that Yeager and BSAA were agents of Fairview and therefore entitled to coverage. The court also found that Yeager and BSAA would be covered under section A.3 of the Endorsement because A. 3 provided coverage to any permissive user, and Yeager was using Fairview's Ford Explorer with its permission.
¶ 15. The court further held that Addison's policy was primary and that it breached its duty to indemnify by refusing to contribute to the settlement with Romero. As a result, the court ordered Addison to pay its policy limits of $1 million, and awarded West Bend its expenses and reasonable attorneys' fees incurred in litigating the coverage issue. Addison filed a motion for relief pending appeal seeking a stay of enforcement. The circuit court granted Addison's motion for stay but required it to pay a $1.2 million bond payable to West Bend pursuant to Wis. Stat. § 808.07(2m)(a) (2013-14).
II. DISCUSSION
¶ 16. Contrary to the circuit court, we adjudge that section A.2 of the Endorsement is the provision applicable to the accident, not the Garage Coverage Form or section A.3 of the Endorsement. Section A.2 limits coverage for "anyone other than an officer, agent[,] or 'employee' " of Fairview to cases where there is no other valid and collectible insurance. The parties agree that Yeager was not an officer or employee, and we conclude that Yeager was not Fairview's agent. Thus, because Yeager was covered by West Bend's policy, Fairview's policy provided no coverage for the accident.
General Legal Principles
¶ 17. We review the circuit court's grant of summary judgment de novo.
¶ 18. Interpretation of an insurance policy is a question of law we review de novo. Id., ¶ 5. Insurance policies are contracts, and they should be interpreted as such. Smith v. Atlantic Mut. Ins. Co.,
¶ 19. An endorsement may add to, modify, or supplant the original policy. Inter-Insurance Exch. of Chicago Motor Club v. Westchester Fire Ins. Co.,
Endorsement Section A.2 Controls
¶ 20. The threshold question in this case is which provisions of the policy are operative in determining coverage. West Bend argues that coverage applies no matter which provision controls — the Garage Coverage Form, section A.2, section A.3, or various combinations thereof. Addison builds its case on section A.2. We agree with Addison.
¶ 21. In our view, a reasonable insured would read the Endorsement in Addison's policy as supplanting the Who Is An Insured provisions of the Garage Coverage Form. The Endorsement is entitled Wisconsin Changes — indicating a special applicability to this policy. On the top of the page, the Endorsement states that it "changes the policy." It further states that the Endorsement "modifies insurance provided under the . . . Garage Coverage Form," and similarly, that "the provisions of the Coverage Form apply unless modified by the endorsement."
¶ 22. Both sections A.2 and A.3 of the Endorsement by their terms purport to modify Who Is An Insured. Section A.2 says that for businesses like Fairview's, insureds now "include anyone other than an officer, agent or employee," but only if that person has no other valid and collectable insurance. This is a dramatic limitation of coverage that conflicts with the Garage Coverage Form, which, with some exceptions, generally covers all permissive users. Section A.3, mirroring the Garage Coverage Form, indicates that "[a]nyone else" using a covered auto with appropriate permission is "added to Who Is An Insured." In light of the Endorsement's clear effort to restrict coverage in conflict with the Garage Coverage Form, the Endorsement is best read as supplanting the Who Is An Insured provisions of the Garage Coverage Form.
¶ 24. West Bend counters that Pemper is distinguishable because the Endorsement here presupposes the continued existence of the Garage Coverage Form. It points to section A.4 of the Addison policy, which "replace[s]" portions of the Garage Coverage Form's Who Is An Insured provision.
¶ 25. This is a fair argument, but it does not win the day. Insurance contracts, including endorsements, regularly include language that is only operative in certain fact situations or for certain policy holders. A prime example is section A.1 of the Endorsement, which applies when the policy holder's business "is other than selling,
¶ 26. Section A.4 purports to modify certain provisions of the Garage Coverage Form applying to "customers." The record reflects that Fairview buys cars to sell at auctions. It does not have a used car lot nor does it sell cars to the public, and therefore does not have "customers" as contemplated by the Garage Coverage Form. Section A.4 also indicates that it only applies when the declarations describe the policy holder as an auto "dealership" (presumably because dealerships have "customers" to whom the coverage applies). The declarations here describe Fairview's business as "used auto sales." Additionally, A.4 contains the same maximum coverage limits allowed by Wis. Stat. § 344.01(2)(am)
¶ 27. What remains, then, is the proper reading of sections A.2 and A.3. Section A.2 applies to businesses "selling, servicing, repairing or parking 'autos' " — a definition both sides agree applies to Fair-view. The provision goes on to modify who is covered by the policy "to include anyone other than an officer, agent or 'employee'. . . while using a covered 'auto'"— subject to the proviso that coverage applies only if the person "has no other valid and collectible insurance with at least the applicable minimum limit." This provision significantly limits coverage for a broad category of people — anyone other than an officer, agent, or employee. Section A.3, however, provides much more expansive coverage to "[a]nyone else . . . while using a covered 'auto' you own with your or any adult 'family member's' permission."
¶ 28. These provisions were not written from scratch by an enterprising Addison attorney; they derive from the framework outlined in Wisconsin's omnibus automobile insurance statute, Wis. Stat. § 632.32. Section 632.32 generally "applies to every policy of insurance issued or delivered in this state against the insured's liability for loss or damage" caused by motor vehicle accidents. Sec. 632.32(1). It requires that all insurance policies provide coverage to those using a covered motor vehicle "when the use is for purposes and in the manner described in the policy," and that coverage must "extendí] to any person legally responsible for the use of the motor vehicle." Sec. 632.32(3)(a)-(b). Policies may, under the statute, "limit coverage to use that is with the permission of the named insured" or adult members of the insured's household. Sec. 632.32(5)(a). However, motor vehicle handlers like Fairview
¶ 29. The plain language and statutory context make clear that section A.2 is primary and operative here. First, section A.2 deliberately invokes a statute that allows insurers to restrict coverage — here beyond the default coverage of permissive use in the Garage Coverage Form. The only reasonable view is that Addison meant it as a limitation of coverage. See Henry ex rel. Weis v. General Cas. Co.,
¶ 30. Moreover, Section A.2 is far more specific than section A.3. See Ruppa,
¶ 31. Interpreting section A.2 as primary also makes the best sense of the text of section A.3, which reads and looks like a catchall for those not already covered. Section A.3 does not provide coverage merely to "anyone," but to "anyone else." The word "else" necessarily implies something prior. For example, suppose a wife calls her husband and asks him to pick up milk and eggs at the store. He might respond, "Do we need anything else?" "Else" signifies that prior instructions have already been given. Similarly, the use of "anyone else" in section A.3 signifies that some delineation of coverage has already been given.
¶ 32. Further, interpreting section A.3 as a residual category best harmonizes sections A.2 and A.3. Section A.2 is a dramatic limitation of coverage for nonofficers, nonagents, and nonemployees; they only have coverage under Fairview's policy if they are without valid and collectible insurance. If we interpreted A.3 as applying to anyone, it would conflict with limitations of coverage in A.2 by providing coverage to nonofficers, nonagents, and nonemployees where A.2 would deny it. Our interpretation avoids finding a conflict or an ambiguity, and it also makes sense of both provisions. See Stanhope,
¶ 33. For these reasons, a reasonable insured would understand that section A.2 is the primary provision, and section A.3 is a subordinate catchall. This reading, of course, does not on its face render A.3 without a zone of applicability. A.2, by its plain terms, does not apply to "an officer,
The Accident Is Not Covered By The Policy
f 34. Our reading of the policy's coverage can be summarized as follows: Section A.2 of the Endorsement limits coverage for anyone other than an officer, agent, or employee to those without other insurance. Section A.3 provides coverage for permissive use by Fairview's officers, agents, or employees. Yeager had other coverage under West Bend's policy and was using the auto with permission. The critical question, then, is whether Yeager was an officer, agent, or employee of Fairview. West Bend does not argue that Yeager was an officer or employee of Fairview; it contends that Yeager was acting as Fairview's agent at the time of the accident. If Yeager was acting as an agent of Fairview, then section A.2 does not apply to him and he would be covered under section A.3 of the Endorsement as a permissive user. If he was not an agent, the Addison policy provides no coverage because Yeager was already covered under West Bend's policy. We conclude that Yeager was not an agent of Fairview, and therefore was not covered under Fairview's policy with Addison.
¶ 35. West Bend argues that the term "agent" is ambiguous, and "must be interpreted in favor of coverage." West Bend cites Kettner v. Wausau Ins. Cos.,
¶ 36. At the outset, if "agent," undefined, is ambiguous as a matter of law and always interpreted in favor of coverage, one might expect all insurers since Kettner was decided more than twenty years ago would have gotten the message and stopped using it in their policies. However, Kettner did not so hold. In Kettner, the core issue was whether a statute limiting the liability of certain governmental entities applied to independent contractors or just servants. See id. at 731. Thus, because the word "agent" may apply to either an independent contractor or a servant, we concluded that it was ambiguous as used in that statute. Id. at 732-33 ("[W]e conclude that the meaning of agent as used in [Wis. Stat.] § 893.80 is ambiguous."). We did not announce a broad rule that the word "agent" is categorically ambiguous in every statute or contract.
¶ 37. While it might be easy to say that words with broad common law meaning are ambiguous, courts must resist the temptation to use ambiguity as a short cut when faced with a vexing problem. Rather, our task, with the assistance of the parties, is to do the hard work of making sense of a contract even when it is not clear on the surface. Simply because a policy is complex does not mean it is ambiguous. Hause v. Bresina,
¶ 38. The Wisconsin Supreme Court has accepted and applied this definition of agency from the Restatement: "[T]he fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act." Hoeft v. Friedel,
¶ 39. Agents may be either servants or independent contractors. Arsand v. City of Franklin,
¶ 40. An independent contractor is one "who contracts with another to do something for him but who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct." Restatement (Second) of Agency § 2(3) (1958). While a servant is always an agent, an independent contractor may or may not be an agent. Saunders,
¶ 41. It is evident that Yeager and Fairview were not in a master/servant agency relationship. The agency relationship here, if it exists at all, is premised upon a claim that Yeager was an independent contractor acting as Fairview's agent for the purposes of selling the vehicle.
¶ 42. The circuit court was no doubt correct that "as a general rule the auctioneer is the agent of the seller." Thorp Sales Corp. v. Gyuro Grading Co.,
¶ 43. As already noted, the language of section A.2 is taken directly from Wis. Stat. § 632.32(5)(c), which allows insurers to restrict coverage for everyone other than the motor vehicle handler to whom the policy is issued and those acting on its behalf and for whom it is liable — "its officers, agents or employees." Id. Read as a whole, the legislature wanted to ensure that those driving cars on behalf of the motor vehicle handler — its officers, agents, and employees — were covered more broadly. It makes sense that the kind of agency contemplated here is that the driving of the car itself must be an act within the scope of agency.
¶ 44. We agree with the circuit court that BSAA had limited agency authority from Fairview to sell the Ford Explorer. But while BSAA may be an agent for certain purposes, that does not transform all of its services — including repairing vehicles, cleaning them, and storing them — into principal/agent activities. The question of agency is fact specific. As to driving the car to the proper location for the auction, Fairview had no control over Yeager — and consequently no agency relationship with him. Although Fairview exercised control over BSAA and the auctioneer in the sale of Fairview's vehicles, it did not exercise any control over BSAA's auction house set-up, safety precautions, training, or vehicle traffic patterns for moving vehicles in and out of place. Yeager did not have the fiduciary obligations of an agent, nor was he subject to Fair-view's control, with respect to moving vehicles.
¶ 45. Because Yeager was not an officer, agent, or employee of Fairview, he was insured only if there was no other valid and collectible insurance pursuant to section A.2. But West Bend's policy with BSAA did cover the August 25, 2011 accident. Therefore, Yeager was not covered under Addison's policy.
¶ 46. Since the policy did not cover Yeager, the circuit court erred in ordering Addison to pay its policy limits and in awarding West Bend its attorneys' fees and costs in pursuing coverage. As to the appeal bond, because we reverse the circuit court's grant of summary judgment to West Bend, the issue is now moot.
By the Court. — Judgment reversed.
Notes
Addison does not dispute that the Ford Explorer was a covered auto under its policy.
Section A.l of the Endorsement applies "if your business is other than selling, servicing, repairing or parking 'autos.'" Section A.4 of the Endorsement references and replaces specific provisions of Who Is An Insured. Section A.5 modifies the Fellow Employee Exclusion.
All references to the Wisconsin Statutes are to the 2013-14 version unless otherwise noted.
Among its alternative theories, West Bend argues that section 3.a.(2)(c) of the Garage Coverage Form provides an independent ground for coverage. Although we need not address it in any depth, West Bend does not make a plausible argument that the Garage Coverage Form would have supplied coverage. The form provides no coverage to a person working in a business that sells cars unless that business is Fairview's garage operations. Yeager was working for BSAA, not in Fairview's garage operations. And while garage operations includes work necessary and incidental to the business, we find no merit in the proposition that Yeager's work was necessary or incidental to Fairview's garage business. Therefore, the Garage Coverage Form would not have provided coverage even if it did apply.
Section A.4 of the Wisconsin Changes Endorsement provides:
The Garage Coverage Form is changed as follows:
a. Paragraph a.(2) (d) (i) of the Who Is An Insured Provision is replaced by the following:
Has no other available insurance (whether primary, excess or contingent), they are an "insured" but only up to $115,000 for each "accident", which is the minimum combined single limit of liability specified by Wis. Stat. [§] 344.01(2)(am).
b. Paragraph a.(2)(d)(ii) of the Who Is An Insured Provision is replaced by the following:
Has no other available insurance (whether primary, excess or contingent), less than the applicable minimum limit for "bodily injury" or "property damage" liability specified by Wis. Stat. [§] 344.01(2)(am), they are an "insured" only for the amount by which the applicable minimum limit of liability exceeds the limit of their other insurance ....
The policy describes the minimum "limit of liability specified by. . . [Wis. Stat. §] 344.01(2)(am)," the 2009-10 version of the statute. The minimum limits for motor vehicle handlers are now contained in § 344.01(2)(d). Wis. Stat. §§ 344.01(2)(d) & 632.32(5)(c) (2013-14).
Fairview is in the business of selling cars which makes it a "motor vehicle handler" under the statute. Wis. Stat. §§ 218.0101(23)(a), 632.32(2)(b).
Addison points out that the policy language is also derived from a standard form endorsement based on the statute and promulgated by Insurance Services Office.
Mutual Fed. S & L Ass'n v. Wisconsin Wire Works,
In addition to the parts of the Restatement that have been explicitly adopted by Wisconsin courts, we cite to other provisions for their persuasive value.
Restatement (Second) of Agenoy § 14N, cmt. a (1958) was cited with approval in Pavalon v. Fishman,
We leave for another day the broader question of whether an agent under Wis. Stat. § 632.32(5)(c) must necessarily be in a master/servant agency relationship, thereby incorporating principles of vicarious liability under respondeat superior. The critical question is whether the driver was acting as an agent while driving. Here, Yeager was not.
We generally decline to reach the merits of a moot issue as it is a purely academic exercise. PRN Assocs. LLC v. DOA,