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Brian Bean

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Does Directing Traffic Constitute "Use" for Purposes of Under-Insured Motorist Coverage?

Posted by Brian Bean

Jackson vs Wisconsin County Mutual, Decided 6/10/14 by the Wisconsin Supreme Court

On the day of the accident, Rachelle Jackson was on duty as a Milwaukee County Sheriff Deputy directing traffic at the Milwaukee airport. She was about to direct the driver of a car when she walked in front of that car to check for oncoming traffic. The driver of that car pulled forward and struck Ms. Jackson.

She presented an under-insured motorist claim to the County’s commercial automobile policy. Wisconsin County Mutual disputed coverage and this lawsuit began.

The policy pays sums owed by an under-insured motorist to an insured person who is injured “using an automobile within the scope of his or her employment or authority.

The policy defines “using” by the meaning set forth in Wisconsin Statute § 632.32(c) (2), which defines “using” to “include driving, operating, manipulating, riding in and any other use.”

Jackson argued that she was directing the driver of the car into traffic, and that this constituted “manipulating” or was making some “other use” of the car.

Prior cases have granted coverage to persons directing a car. In those cases, the actual driver is really acting under the direction and control of the person directing them. In those cases, the person directing the car is “manipulating” the car, which constitutes “use”, and coverage was granted.

In Ms. Jackson’s case, she had not yet started directing the car into traffic. Therefore, she was not yet “manipulating” or “using” it by definition. The Court found that she was not entitled to under-insured motorist coverage under this set of facts.

Comments:
Had Ms. Jackson started to motion for the car to pull forward, it seems she would have met the definition of “use” and been granted coverage.

 

This material is for informational purposes only and not for the purpose of providing legal advice. R&R Insurance Services, Inc. is not a law firm. You should contact your attorney to obtain advice with respect to any issue or problem specific to you or your business. The information contained in this document is intentionally condensed and a summary of statutes and court findings.

Topics: Safety, Personal Insurance, Business Insurance

Equipment Seller’s Indemnification Clause in its Sales Contract

Posted by Brian Bean

Jurisdiction: Wisconsin
Court: Wisconsin Supreme Court
Decision Date: 3/6/2003

Case Title: Deminsky vs Arlington Plastics, Image Plastics,
2003 WI 15; 259 Wis.2d 587; 657 N.W. 2d 411.
This is a Wisconsin Supreme Court decision, and is mandatory authority in Wisconsin.

Insurance Issues:

  1. Equipment Seller’s Indemnity Agreement, in favor of the Seller, can be very broad.
  2. How to properly draft these Indemnity Agreements, per the Court.
  3. If you buy something, you better read the entire contract for Indemnification requirements.
  4. Tenders of defense to Buyer from the Seller.
  5. Improper use of equipment, and injuries resulting from that improper use.

 

Legal Issue:

Was the Sellers indemnification agreement contained in its sales contract for a piece of equipment enforceable against the Buyer?
Also:

  1. Choice of Law Clauses in a Contract-WI Uniform Commercial Code §401.105(1) (1995-96). Note: §401.301 (1) in 2011-12.
  2. Conspicuous Standards in a Sales Contract–WI U.C.C. §401.201 (10) (1995-96). Note: §401.201 (2) (f) in 2011-12. There are now some guidelines regarding all CAPS, contrasting font, color and size that sets off, or calls attention to, the language in question.
  3. Unconscionable Clauses in Contracts–WI U.C.C. §402.302 (1995-96). Unchanged in 2011-12.

 

Resolution:

The Wisconsin Supreme Court found that the indemnification agreement on the back of the Seller’s contract was enforceable against Buyer even to the extent of potential claims of improper design.

 

Facts of the Case:

Image Plastics is a Wisconsin corporation that recycles and reprocesses plastic. They were looking to purchase a machine that could grind and process plastic snow fence.

Image shopped around and eventually purchased a used machine from Arlington Plastic in Illinois. Arlington Plastic is an Illinois corporation.

The owner of Image drove to Arlington Plastic, inspected, and tested the machine. A sales order form was signed by Image. It was one-page, front and back, with the terms and conditions listed on the back of the order. The owner of Arlington admitted that he never verbally discussed the back of the sales order with Image. The owner of Image admitted that he was aware that there were “Terms and Conditions” on the back of the form, but he did NOT read it.

The owner of Image signed the front page directly below the following warning about the terms and conditions located on the back of the form:

We offer to purchaser the following articles for the purchase price specified above and subject to the terms and conditions set forth on the reverse side of this Agreement and Offer. This Agreement shall become effective upon, but not until, execution by ARLINGTON PLASTICS MACHINERY, INC. and PURCHASER. The terms and conditions on the reverse side are part of this agreement as effectively as though they precede the signature of the purchaser.

AGREED

The back of the sales agreement contained the following, relevant language:

WE [Arlington] ACCEPT YOUR ORDER ONLY ON THE EXPRESS CONDITION THAT YOU ASSENT TO THE TERMS CONTAINED BELOW AND YOUR ACCEPTANCE AND RECEIPT OF THE GOODS SHIPPED HEREUNDER SHALL CONSITUTE ASSENT TO SUCH TERMS.
….
3 – BUYER’S INDEMNITY OF ARLINGTON.
A. WARNING…Seller will not be responsible for any loss or injury resulting from defects in the items sold or from the subsequent use of the items. Buyer expressly agrees as a condition of the purchase of these items that it will indemnify and hold Seller harmless from any and all claims that may hereafter at any time be asserted by any subsequent owner or user of the items sold hereunder or asserted by any agent or employee of such user or by any third party arising from any purported defect in the items or by reason of the use of these items. Purchaser agrees to assume all responsibility in connection with the goods upon delivery thereof to the customer or to a common carrier.

B. HAZARDS LIABILITY – Purchaser shall indemnify and hold harmless Seller...from and against any and all losses, expenses, demands, and claims made against Seller…by Buyer, any agent, servant, or employee of Buyer, any subsequent Purchasers…because of injury or illness (including death)…actual or alleged whether caused by the sole negligence of Seller, the concurrent negligence of Seller with Buyer, any agent, servant, or employee of Buyer, any subsequent Purchasers…resulting from, or in any way connected with the operation, maintenance, possession, use, transportation, or disposition of the Articles…Buyer agrees to defend any suit action or cause of action brought against Seller, its agents, servants, or employees based on any such alleged injury, illness, or damage and to pay all damages, costs and expenses including attorney’s fees in connection therewith or resulting therefrom.

Arlington did NOT provide an owner’s manual or any training in the proper use of the machine to Image. There was NO sign on the machine warning the user that the guards should not be removed.

When employees of Image used the machine to grind plastic snow fence, they found that it repeatedly clogged. They had to remove a metal guard box to unclog it. The employees found this process inconvenient and time-consuming. Sometimes operators used the machine with the guard off. Some employees even refused to use the machine because they felt it was too dangerous.

The Plaintiff, an employee of Image, seriously injured his right arm and hand when his sweatshirt sleeve got stuck in the machine. He was operating it without the guard in place.

The injured employee of Image Plastics filed suit against Arlington alleging that Arlington:

  1. Altered a guard on the grinder or caused the guard to be altered;
  2. Negligently designed, installed, and constructed the guard;
  3. Allowed the grinder to be sold in such condition; and
  4. Negligence.

Arlington tendered the defense of the lawsuit to Image based on the indemnification clause found in the Sales Agreement.

The Wisconsin Supreme Court reviewed the contract and found that the clauses were enforceable. Image argued that the contract violated Wisconsin law, and that Wisconsin Law should apply. The Plaintiff argued that the contract specified that Illinois Law should apply.

Choice of Law Provisions in a Contract:
Wisconsin Uniform Commercial Code (UCC) 401.105(1) (1995-96) allows parties the freedom to stipulate which State’s law will apply to a contract’s interpretation. The Court reviewed Illinois and Wisconsin law and applied Wisconsin Law. The Court concluded that Wisconsin and Illinois law would have come to the same resolution.

Buyer’s Indemnification for Product Design and Manufacture:
Image argued that the Arlington has a non-delegable duty to produce a safe product. Therefore, the indemnification agreement is unenforceable.

The Wisconsin Supreme Court rejected this argument. They noted that there is a non-delegable duty to design and manufacture a safe product. However, the Court also recognized that, if properly done, contracting parties can shift the financial burden of potential liability amongst themselves.

Were the terms of Contract Commercially Unreasonable?
The Court found that Image had other choices in the marketplace, and that Image purchased from Arlington because they were the closest and the cheapest. If Image found the terms of the agreement unacceptable, they could have gone to another seller.

Please note that if Arlington was the only choice in the marketplace for this grinder, the Court could have found the indemnification agreement commercially unreasonable, and therefore, unenforceable.

Was the Indemnity Agreement Unconscionable because the terms were Inconspicuous?
Image argued that the indemnification agreement was unconscionable because its terms were inconspicuous. In other words, the indemnification agreement was not open and obvious, and therefore it is unfair to now force the Buyer to defend the Seller.

The Court again rejected Image’s argument. They noted that the agreement was one page, front to back. The front page clearly referenced the terms and conditions on the back page.

Further, key terms were in bold and CAPITAL LETTERS, such as “3 – BUYERS INDEMNITY OF ARLINGTON

The Court concluded that this Indemnification agreement was valid and enforceable. The rest of the Court’s decision dealt with the enforceability of a release and assignment of claim from Image to the injured employee.

 

This material is for informational purposes only and not for the purpose of providing legal advice. R&R Insurance Services, Inc. is not a law firm. You should contact your attorney to obtain advice with respect to any issue or problem specific to your business. The information contained in this document is intentionally condensed and is a summary of court findings.

Topics: Business Insurance

Truckers Liability Insurance & Bobtail Liability Insurance

Posted by Brian Bean

Jurisdiction: Wisconsin
Court: Wisconsin Supreme Court
Decision Date: 4/18/2014

 

Case Title: Casey vs. Smith, Acceptance Casualty and Great West Casualty; 2012AP667
This is a published decision. Therefore it is mandatory authority and may be cited as legal precedent.

 

Insurance Issues:

  1. Truckers Liability Policies.
  2. Bobtail Liability Policies, exclusions 14(a) and 14(b).
  3. Lease agreements between individual truckers and truck companies.

 

Legal Issue: In this particular traffic accident, did Acceptance Casualty’s Bobtail Liability policy apply, or did Great West Casualty’s Truckers Policy apply?

 

Resolution:
The Wisconsin Supreme Court used this case to adopt the Hartford Rule to resolve these disputes in Wisconsin. The Hartford Rule asks whether the semi was being used to further the commercial interests of the lessee. The Hartford Rule is used in several jurisdictions and was first defined in the 7th Federal Circuit.

 

Facts of the Case:
John Z. owned a semi. He agreed to lease the semi and a driver exclusively to Taylor Truck line.

The terms of the lease specified that John Z. would:

  1. “Bear all expenses to the operation of the equipment, including…repairs and maintenance” and “maintain the equipment in a state of repair required by all applicable regulations.”
  2. Taylor Truck Line would obtain insurance required by federal law.
  3. John Z. would obtain bobtail liability insurance to cover the semi “when not used in performance under this agreement.”

John Z. obtained a bobtail liability policy through Acceptance Casualty, and Taylor Trucking obtained a truckers policy through Great West Casualty.

The semi sustained minor damage to the grille. Thirty days later, John Z. was driving the semi to the repair facility to replace the grill and pick up an oil filler tube which he intended to replace himself. Neither of these repairs would have put the semi out-of-service.

On the way to the repair facility, John Z. was involved in a multi-vehicle traffic accident which ultimately resulted in two bodily injury lawsuits. After the accident, a Wisconsin State Trooper inspected the semi and noted that there were no violations.

He was not on-duty for Taylor Truck on the day of the accident. In addition, Taylor Truck had not ordered, nor was even aware, that he was getting repairs done. Essentially, the repairs were being completed when it was convenient for John Z.

The dispute arose between Acceptance and Great West.

Acceptance denied coverage citing Exclusions 14(a) and 14(b). They argued that because John Z. was on his way to a repair facility, the semi was being used for a “business purpose” of Taylor Truck.

Great West also denied coverage arguing that their policy only afforded coverage when the semi was “being used exclusively in Taylor’s business.”

The insurance carriers disagree about whether John Z. was using the semi “in the business of” Taylor Truck at the time of the accident.

The Wisconsin Supreme Court used this case to adopt the Hartford Rule to resolve these disputes in Wisconsin. The Hartford Rule asks whether the semi was being used to further the commercial interests of the lessee.

Acceptance made several arguments and pointed to facts that the semi was being used to further the commercial interests of Taylor Truck.

The Court rejected all these arguments and concluded that because the repairs were not required by the lease agreement, were not done pursuant to orders by Taylor Truck, and were not necessary for the semi to continue its service, the trip that day was not in furtherance of Taylor Truck’s commercial interest at the time of the accident. Therefore, Acceptance Casualty’s Bobtail Liability Policy applied, and Great West Casualty’s policy did not.

The Court also stated that Acceptance’s interpretation of a business purpose was overly expansive and could render their insurance coverage illusory.

 

This material is for informational purposes only and not for the purpose of providing legal advice. R&R Insurance Services, Inc. is not a law firm. You should contact your attorney to obtain advice with respect to any issue or problem specific to your business. The information contained in this document is intentionally condensed and is a summary of court findings.

Topics: Business Insurance

Is Manure a "Pollutant" in Wisconsin?

Posted by Brian Bean

Cows in a PasturePotentially impacting both your business and your personal insurance policies under liability and property coverages, there were 2 recent cases from different branches of the Wisconsin Court of Appeals that came to different conclusions on essentially the same set of facts.

 

Business impact:

A farmer fertilized his field and that fertilizer contaminated a neighbor’s property. One court agreed with the insurer and denied coverage, the other sided with the farmer.

Read full article here

 

Personal impact:

There is also a recent homeowners case where bat guano got so bad in a seasonal home that the house had to be torn down. In that case, the Wisconsin Supreme Court said that bat guano was a “pollutant”, sided with the insurer and denied coverage for the house.

Related: Skunks Cause Waukesha Family One Stinky Mess!

 

Questions about your policy exclusions? Contact a knowledgebroker.

Topics: Personal Insurance, Business Insurance

Lawyer Denied Work Comp Benefits - Claims he was "Rainmaking" for the Firm

Posted by Brian Bean

Motorcycle RidersThis is an unpublished case from District IV of the Wisconsin Court of Appeals filed on 5/22/14.

 

ISSUE: Was the lawyer in the course and scope of his employment when he was on a trip to a motorcycle rally with a client?

 

ANSWER: Not in this case – work comp benefits denied.

 

FACTS:
Westerhof was an attorney and shareholder in the law firm of DeWitt, Ross & Stevens. In an effort to market himself he joined a poker group which included small business owners and a real estate appraiser, S. Franken. The law firm would reimburse Westerhof for expenses involving this poker group from time-to-time.

Westerhof handled a small claims action for Franken which involved a cabin Franken owned near Wisconsin Rapids. Westerhof filed an answer to the complaint of Franken’s behalf, and also moved to void an insurance release.

A few months later, Westerhof asked Franken if he could go with Franken and his wife to a Harley-Davidson Rally in Tomahawk. There is some inconsistent testimony on whether the three of them had originally planned to take some pictures of the cabin on the way up to the Rally. Regardless, the plan changed due to a delay in their departure from Madison, and they did not stop at the cabin. Nevertheless, Westerhof testified that he considered the excursion to be a business trip.

Somewhere near Wausau, Westerhof lost control of the motorcycle and was severely injured.

Westerhof sought worker’s compensation benefits claiming that the injury arose out of his employment because at the time he was “rainmaking” or “networking” on behalf of the firm.

The Administrative Law Judge and the Labor and Industry Review Commission (LIRC) denied Westerhof’s claim. Westerhof appealed to the circuit court which affirmed LIRC’s decision.

The Court of Appeals affirmed the lower court’s decision and ruled that in this set of facts, Westerhof was not in the course and scope of his employment. Westerhof did not initiate the event to entertain a client. Rather he was a guest on a personal trip initiated by Franken.

The court stated that even if the poker games could be considered client entertainment or business-related networking, it does not follow that every trip or activity that Westerhof and Franken undertook together was client entertainment or business-related networking.

 

COMMENTS:
The case is available if you want to read it. It reviews prior cases where work comp benefits were awarded, and then distinguishes this case from those.

 

This material is for informational purposes only and not for the purpose of providing legal advice. R&R Insurance Services, Inc. is not a law firm. You should contact your attorney to obtain advice with respect to any issue or problem specific to your business.

Topics: Workers Compensation, Business Insurance