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State Automobile and Casualty Underwriters v. Dodson

July 24, 1962


Author: Knoch

Before DUFFY, KNOCH and SWYGERT, Circuit Judges.

KNOCH, Circuit Judge.

This action arose out of an accident which occurred near La Crosse, Wisconsin, in September, 1951, between a truck (owned by Walske Transfer and driven by Martin Kujak, a partner of Walske Transfer) and a passenger automobile driven by Carlet Miller.

Plaintiff-appellee, State Automobile and Casualty Underwriters, hereinafter called "State Automobile," had issued a policy of automobile insurance to Walske Transfer, hereinafter called "Walske." Chicago Ice Producers Mutual, State Automobile's filing agent in Wisconsin, issued and filed with the Wisconsin Public Service Commission a policy of automobile liability insurance covering the operation of Walske's equipment under Walske's I.C.C. permit. The principal policy was issued to Walske in Minnesota, where Walske was domiciled, by State Automobile.

At the time of the accident, however, the Walske truck was being operated under a lease to Moore Motor Freight Lines, hereinafter called "Moore," under Moore's own I.C.C. franchise. Defendant, Bruce Dodson, Attorney-in-Fact for Subscribers at Casualty Reciprocal Exchange, hereinafter called "Bruce Dodson," had issued a policy of automobile insurance to Moore.

In May, 1952, a passenger in the Walske truck at the time of the accident, Eugene Jaster, brought suit in the Circuit Court of La Crosse, Wisconsin, for injury and damage sustained by him. He sued all four of the Kujak brothers, doing business as Walske Transfer, and Chicago Ice Producers Mutual. Moore, Bruce Dodson, Carlet Miller and Carlet Miller's insurer, Rural Mutual Casualty Insurance Co., were joined as parties defendant.

A few days later, State Automobile and Chicago Ice Producers Mutual entered into a non-waiver agreement with Walske to defend the Jaster lawsuit, and any other actions which might later be filed arising out of the accident described above, at their own cost. State Automobile's policy was restricted to operations under Walske's own I.C.C. permit. It is admitted by Bruce Dodson that State Automobile's policy did not cover the accident. State Automobile points to provisions in its policy obliging it to defend even groundless, false, or fraudulent suits against its insured, and cites cases in which the courts have held that the insurer is obligated to assume defense of the action if the complaint in the action brought against the insured upon its face alleges facts which come within the coverage of its policy. Although State Automobile knew and advised Walske even before the action was filed that State Automobile believed there was no coverage under its policy, State Automobile's counsel thought that the original complaint filed by Mr. Jaster spelled out a cause of action within the coverage of its policy despite the known facts to the contrary.

Shortly thereafter, State Automobile tendered the defense of the Jaster claim to Bruce Dodson, which refused the tender and made a counter-tender of the defense to State Automobile. Bruce Dodson asserts that throughout the litigation, counsel for Bruce Dodson sought to convince the jury that Martin Kujak was not negligent, or was less negligent than Carlet Miller; that if Bruce Dodson had accepted the tender of defense of Martin Kujak and Walske, that defense would have been conducted in the same manner. Bruce Dodson also argues that counsel for Chicago Ice Producers was fully aware of the proposed defense, was present at the first of the three trials of this cause, but nevertheless, participated in none of the examination or cross-examination of witnesses on the issues of the Jaster claim or the Miller claim (described below), and made no criticism of the conduct of the defense. State Automobile contends that at the time of the counter-tender on May 23, 1952, State Automobile and Walske were notified that defendant intended to defend on behalf of Moore only.

No effort was made to secure a declaratory judgment as to the rights of the respective parties under the several insurance policies.

Mr. Miller, as indicated, cross-complained against Martin Kujak, Walske, and Chicago Ice Producers to recover for his injury and damages. Bruce Dodson cross-complained against Martin Kujak, Walske and Chicago Ice Producers for reimbursement of any sums Bruce Dodson might be required to pay to Mr. Jaster or Mr. Miller because of Martin Kujak's negligence. There were thus two claims for damages and one for indemnification. Bruce Dodson admitted that the Moore policy covered the claims of Mr. Jaster and Mr. Miller.

Chicago Ice Producers filed a plea in abatement on the ground that its principal policy was a foreign insurance contract containing a "no action" clause. The question of non-coverage was not raised. Judgment dismissing the complaint and cross-complaints as to Chicago Ice Producers was entered before any trial.

On the first day of trial, Bruce Dodson and Rural Mutual, Mr. Miller's insurer, settled the Jaster claim, taking releases of all the defendants, including Martin Kujak and Walske. The Miller claim proceeded to trial. The jury rendered a verdict in favor of Mr. Miller.

The Trial Court heard the issue of indemnification and determined that Bruce Dodson was entitled to indemnification from Martin Kujak and Walske. Both Bruce Dodson and Moore appealed the judgment in favor of Mr. Miller to the Wisconsin Supreme Court, as did Walske, who in addition cross-appealed the judgment for indemnification. Counsel for Bruce Dodson and Moore prepared the record, transcript of testimony and appendix, and made the argument in chief in the Wisconsin Supreme Court, which reversed the judgment and remanded the cause for a new trial. Jaster v. Miller, 269 Wis. 223, 69 N.W.2d 265, 1955. The jury had apportioned negligence 75 percent to Martin Kujak and 25 percent to Carlet Miller. In response to special verdict questions, the jury, inter alia, found Martin Kujak negligent as to lookout. The Wisconsin Supreme Court found no evidence to support the finding of negligent lookout on the part of Martin Kujak, and found that two instructions to the jury on the question of Carlet Miller's negligence should not have been given. A new trial was ordered on all issues except damages, as to which no objection had been made. The adjudication in favor of Bruce Dodson, for indemnification, and that in favor of Carlet Miller, for damages, had been embodied in one judgment filed July 9, 1954. Walske had filed a notice of appeal with respect to the Trial Court's earlier findings, conclusions and order, of June 15, 1954, for judgment in favor of Bruce Dodson. The Wisconsin Supreme Court held that findings of fact, conclusions of law and orders for judgment are not appealable. Motion to dismiss the cross-appeal was granted, but the Wisconsin Supreme Court carefully noted (at page 235, 69 N.W.2d 265) that its action should not be construed as a decision on the merits as to the reimbursement issue.

On retrial, the jury again rendered a verdict for Mr. Miller, and the Trial Court found Bruce Dodson entitled to indemnification. A second appeal to the Wisconsin Supreme Court resulted in another reversal and remand. Miller v. Kujak, 274 Wis. 370, 80 N.W.2d 459, 81 N.W.2d 569, 1957. The Wisconsin Supreme Court held that a finding of causal negligence of the respective parties depended entirely on where the collision took place. The Trial Court had not asked the jury where the collision occurred. The questions in the special verdict were found to be clearly duplicitous. One question with its answer formed a negative pregnant which the Wisconsin Supreme Court was unable to interpret except by speculation. Because of the ambiguities raised by that question, the Wisconsin Supreme Court was uncertain of the true intent of the jury. The Wisconsin Supreme Court again noted (at page 374a, 80 N.W.2d 459, 81 N.W.2d 569) ...

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