The opinion of the court was delivered by: Robson, District Judge.
This is a personal injury action based on diversity of
citizenship. It is before
the court on defendants' motions to dismiss and defendant
Badger's motion for a change of venue. For the reasons stated
below, the respective motions are denied.
The minor plaintiff, Karen Swanson, was a passenger in an
automobile driven by defendant Badger's insured, James U-Ren. At
about 8:00 p.m. on October 7, 1966, while traveling in a
southerly direction on Highway 53 about four miles south of
Blair, Wisconsin, James U-Ren's automobile struck a construction
crane owned by Pertzsch Construction Co., defendant Employers'
insured. Karen Swanson was injured as a result of this collision.
The plaintiff, a citizen of Illinois, brought suit in this court
on the grounds of diversity of citizenship, the defendants both
being citizens of Wisconsin.
Defendant Badger has moved to dismiss the suit on the ground
that the law of Illinois does not allow a direct action against
an insurer. To allow this suit, argues Badger, would contravene
the public policy of the forum state, Illinois, even though the
applicable conflict of laws principles call for the application
of Wisconsin law to the facts of this case. Defendant Employers
joins Badger in urging these same grounds in its motion to
In addition, Employers claims that the plaintiff's suit should
be dismissed on the ground that it does not state a cause of
action as to Employers' insured, the Pertzsch Construction Co.
Employers argues that the crane hit by U-Ren is not a "motor
vehicle" under the terms of the Wisconsin direct action statute,
and that, therefore, Employers cannot be sued under that statute.
Finally, defendant Badger moves for a change of venue to
Wisconsin, should this court deny its motion to dismiss.
There is no question that Wisconsin law applies to this case.
A federal court sitting in diversity must apply the conflict of
laws principles of the state in which it sits. Klaxon Co. v.
Stentor Electric Mfg. Co., Inc., 313 U.S. 487, 61 S.Ct. 1020, 85
L.Ed. 1477 (1941). Under the more conventional Illinois position
as contained in the Restatement of the Conflict of Laws Second,
§ 379 (Tent. Draft No. 8, 1963), or the more liberal approach in
Babcock v. Jackson, 12 N.Y.2d 473, 240 N.Y.S.2d 743,
191 N.E.2d 279, 95 A.L.R.2d 1 (1963), the law of Wisconsin applies. The
accident was in Wisconsin. The alleged tortfeasors' conduct was
in Wisconsin. The initial treatment of the plaintiff's injuries
was in Wisconsin. Both the alleged tortfeasors and their insurers
are apparently citizens of Wisconsin. It also appears that the
origin and destination of the trip were in Wisconsin. Dym v.
Gordon, 16 N.Y.2d 120, 262 N.Y.S.2d 463, 209 N.E.2d 792 (1965).
There are two statutes in Wisconsin which are relevant in this
case: Wis.Rev.Stats. §§ 204.30(4) and 260.11(1) 1967. Section
204.30(4) provides that an insurance company is liable to persons
entitled to recover for personal injuries, up to the dollar
limits of the policy, regardless of any "no action" clause in the
policy. Section 260.11(1) provides the procedure to be followed
in suits brought under Section 204.30(4). In short, it allows the
insurer to be joined as a proper party defendant.
In Illinois, the court and the parties are prohibited from
mentioning at trial the fact that liability insurance exists. But
it is recognized in the same cases which announce this rule that
it is common knowledge that liability insurance exists more often
than not. Kavanaugh v. Parret, 379 Ill. 273, 40 N.E.2d 500
(1942). This, according to defendants, establishes the policy of
Illinois as being against direct action statutes. This policy,
argues the defendants, is sufficiently strong to force a federal
district court sitting in Illinois to refuse to entertain an
action based on a direct action statute.
The defendants do not contend, however, that there is a
statutory prohibition in Illinois against bringing actions
against insurance companies. This they could not do. See Torcazo
v. Statema, 141 F. Supp. 769, 772 (N.D.Ill. 1956).
The defendants base their argument on the cases of Mutual Service
Casualty Insurance Co. v. Prudence Mutual Casualty Co.,
25 Ill. App.2d 429, 166 N.E.2d 316 (1960), and Millsap v. Central
Wisconsin Motor Transport Co., 41 Ill. App.2d 1, 189 N.E.2d 793
(1963). Mutual Service, supra, holds that the doctrine of
contribution among joint tortfeasors violates the policy of
Illinois and a Wisconsin cause of action cannot be enforced in
the courts of Illinois. The Millsap case, supra, holds just the
opposite, overruling Mutual Service. In the course of its
opinion, the court said, 41 Ill.App.2d at 21, 189 N.E.2d at 803:
"* * * [I]t seems clear that to create a public
policy barrier to the enforcement of a foreign law,
more is required than a mere difference between the
law of the forum and that of the sister state. * * *
Nor does dissimilarity of legislation prove that the
public policy of the forum is offended by the foreign
law. Loucks v. Standard Oil Co., 224 N.Y. 99, 120 NE
198 (1918). As there stated by Judge Cardozo (120
N.E. p. 202): `The courts are not free to refuse to
enforce a foreign right at the pleasure of the
judges, to suit the individual notion of expediency
or fairness. They do not close their doors, unless
help would violate some fundamental principle of
justice, some prevalent conception of good morals,
some deep-rooted tradition of the common weal.'"
It is apparent that the trend of the decisions in Illinois is
toward the recognition of foreign causes of action, even if the
statute to be enforced does not exist in Illinois. From the
court's comments in Millsap, supra, it is possible to infer that
a Wisconsin direct action statute would not be violative of any
more "fundamental" Illinois policy than the comparative
negligence statute of Wisconsin was, or the statute allowing
contribution among joint tortfeasors. Posner v. Travelers
(N.D.Ill. 1965). On this basis,
therefore, this court holds that the Wisconsin direct action
statute is enforceable in a federal district court in a diversity
action. This does not, however, dispose of the case.
According to Illinois conflict of laws principles, the
substantive law of Wisconsin would apply to the facts of this
instant case. The forum decides whether a particular statute is
substantive or procedural; the forum also applies its own
procedural rules to the case, even though, as here, a different
state's substantive law applies. Millsap, supra, 41 Ill.App.2d at
15-16, 189 N.E.2d 793. The question therefore arises as to the
characterization of the Wisconsin direct action statutes. Are
they procedural, as the defendants argue, or are they part and
parcel of a substantive right, as the plaintiff urges?
There is no dispute that § 204.30(4) is substantive. Miller v.
Wadkins, 31 Wis.2d 281, 142 N.W.2d 855 (1966); Koss v. Hartford
Accident & Indemnity Co., 341 F.2d 472 (7th Cir. 1965). Section
260.11(1) which allows the joinder of the insurer as a party
defendant has been called "procedural" by the Wisconsin courts.
E.g., Miller v. Wadkins, supra. However, this label "procedural"
can mean different things at different times. It may be so
important as to be "outcome determinative." Guaranty Trust
Company of New York v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed.
2079 (1945). This court concludes that the right to join the
insurer as a party defendant is so bound up with the substantive
right to sue the insurer directly, that one cannot be separated
from the other. Section 260.11(1) is, therefore, substantive in
nature, as used in this case. See also Torcazo v. Statema, supra,
and Posner v. Travelers Insurance Co., supra, for similar
conclusions. On this ground, therefore, defendants' motions to
dismiss will be denied.
Defendant Employers moves to dismiss on the ground that the
crane hit by U-Ren was not a "motor vehicle" under the terms of
the Wisconsin direct action statute. This question, as it appears
from the discussions in both sides' briefs, depends on whether
the crane was mobile enough to come within the definition of a
motor vehicle. The other requisites of the statute appear to be
satisfied, although this court does not hereby foreclose all
argument on these issues, should it appear later that it is
necessary. The briefs disclose at least one question of fact as
to the mobility of the crane. It would be inappropriate to
dispose of this issue on a motion to dismiss.
It is therefore ordered that defendants' motions to dismiss be,
and they are hereby denied.
It is further ordered that defendant Badger's motion for change
of venue be, and it is hereby denied.