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Attorney(S)

For the appellant there was a brief by Toebaas, Hart, Kraege Jackman of Madison, and oral argument by W. L. Jackman. F.W. Cosgrove, attorney, and S. Richard Heath of counsel, both of Fond du Lac, for the respondent.

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Summary of Opinion — Sandstrom v. Estate of Clausen; Hardware Mutual Cas. Co., Appellant

Factual and Procedural Background

This action to recover damages for personal injuries was begun September 10, 1946, against the alleged tortfeasor, William H. Clausen (deceased at time of opinion), and his insurer, Hardware Mutual Casualty Company. The insurer answered separately asserting that its policy did not afford coverage under the facts of the case and, on the pleadings and the policy, moved for summary judgment. On September 11, 1950, the trial court denied the insurer's motion and the insurer appealed.

The facts, as agreed and stated in the appellant's brief, are: Clausen was insured by Hardware Mutual. At the time of the automobile accident Clausen and the plaintiff, Sandstrom, were each employees of the Minneapolis, St. Paul Sault Ste. Marie Railroad Company (the "Soo Line") and were in the course of their employment. Sandstrom rode with Clausen and claims he was injured by negligent operation of Clausen's car. The policy named William H. Clausen as the insured and included Coverage A (indemnity for sums the insured becomes obligated to pay because of bodily injury arising out of ownership, maintenance, or use of the automobile). The policy's definition of "Insured" extended coverage to the named assured and, except where specifically stated to the contrary, to any person while using the automobile and to any person or organization legally responsible for its use (when operation is with the named assured's consent). The policy also contained an exclusion: the policy "does not apply . . . under coverages A and K, to bodily injury to or death of any employee of the insured while engaged in the employment . . . of the insured, or while engaged in the operation, maintenance, or repair of the automobile." The accident occurred in 1944 and is covered by the statutes of 1943.

Legal Issues Presented

Whether, under sec. 204.30(3), Stats., and the policy language (including the "Definition of 'Insured'" and the employee exclusion), the insurer is obligated to protect and indemnify the named insured (and additional insureds) against a claim by a person who is employed by a third party (here, the Soo Line) rather than by the named insured.
Whether the exclusion for "any employee of the insured" may be construed to bar coverage whenever the injured person is an employee of any party who might have been a defendant (i.e., whether the insurer may extend the exclusion to defeat coverage for the actual defendant when the claimant is employed by some other principal).

Arguments of the Parties

Appellant's (Hardware Mutual Casualty Company) Arguments

The insurer contended, via its answer and motion for summary judgment, that its policy did not afford coverage under the facts presented.
The insurer advanced an interpretation that the exclusion for injuries to "any employee of the insured" could be read broadly so that, if any possible party against whom the injured person might have made a claim was such person's employer, then the actual defendant, regardless of the claimant's relationship to that defendant, would be excluded from coverage.

Respondent's Arguments

The opinion does not contain a detailed account of the parties' legal arguments beyond the insurer's positions summarized above.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Narloch v. Church (1940), 234 Wis. 155, 290 N.W. 595	Asserted by counsel to have overruled Brandt v. Employers' Liability Assur. Corp..	The court noted the assertion but stated that, whether Narloch (and Vick) had overruled Brandt or not, the court's instant decision expressly does so.
Vick v. Brown (1949), 255 Wis. 147, 38 N.W.2d 716	Asserted by counsel to have overruled Brandt v. Employers' Liability Assur. Corp..	The court acknowledged the contention but declared that its present decision expressly overrules Brandt.
Brandt v. Employers' Liability Assur. Corp. (1938), 228 Wis. 328, 280 N.W. 403	Earlier precedent addressing interpretation of similar insurance provisions.	The court expressly states that the instant decision overrules Brandt.

Court's Reasoning and Analysis

The court began by noting that sec. 204.30(3), Stats., has remained unchanged since 1943 and that prior decisions interpreting it have produced results difficult to reconcile. The court therefore re-examined the statute and relevant policy provisions.

The court concluded that, by the purchase and sale of a policy of the type before it, the insurer and the named insured agreed that the named insured would not have insurance against claims brought by his own employees. The court relied on two contract features: the policy's "Definition of 'Insured,'" which extends coverage to persons using the automobile (and to persons or organizations legally responsible for its use) under the same provisions applicable to the named insured, and the statutory omnibus coverage of sec. 204.30(3) which is incorporated in the policy by law.

The court reasoned that, assuming the operation of the automobile was with the named assured's consent, an additional insured receives protection "in the same manner and under the same provisions" as the named assured. Thus, if the named assured has no protection when the claim is by his own employee (because of the policy exclusion), an additional insured likewise has no protection when the claim is by his own employee. Conversely, both the named assured and additional insureds are protected against claims of persons who are not their employees, regardless of who else may be the employer of the claimant.

The court rejected the insurer's proposed construction that would expand the exclusion to bar coverage whenever the injured person was an employee of any party who might have been a defendant (i.e., to transfer the lack of coverage of the claimant's actual employer to bar coverage for the defendant). The court stated that it did not think such an interpretation reflected legislative intent or was required by the statutory language.

Applying this analysis to the instant facts, the court concluded that Clausen's policy excluded coverage only for claims by Clausen's own employees; it did not exclude coverage for claims by Sandstrom, who, for present purposes, was not Clausen's employee. Accordingly, the insurer's motion for summary judgment was properly denied because the insurer must protect Clausen to the limits of the policy against Sandstrom's claim.

Holding and Implications

Holding: The trial court's order denying Hardware Mutual Casualty Company's motion for summary judgment is affirmed. The cause is remanded for further proceedings according to law.

Implications:

Hardware Mutual must protect (defend/indemnify up to policy limits) the named insured, William H. Clausen, against Sandstrom's claim because Sandstrom was not Clausen's employee and the policy exclusion applies only to the insured's own employees.
The court expressly states that its decision overrules Brandt v. Employers' Liability Assur. Corp., and it noted arguments that Narloch v. Church and Vick v. Brown had already overruled Brandt, but the court declared that, regardless of that question, the instant decision does so.
The decision limits the scope of the "employee" exclusion so that it cannot be extended to defeat coverage for a defendant merely because the claimant is employed by some other party who might have been a defendant; coverage is determined by the relationship between the claimant and the particular insured against whom the claim is made.

By the Court. — Order affirmed. Cause remanded for further proceedings according to law.

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SANDSTROM, Respondent, vs. ESTATE OF CLAUSEN and others, Defendants: HARDWARE MUTUAL CASUALTY COMPANY, Appellant.

This action to recover damages for personal injuries was begun September 10, 1946, against the alleged tort-feasor and his insurer. The insurer answered separately to the effect that its policy did not afford coverage under the facts of the case. On the pleadings and the policy it moved for summary judgment. On September 11, 1950, the court entered an order denying the motion and the defendant insurer has appealed.

The facts are agreed upon as stated in appellant's brief, to wit:

"Hardware Mutual Casualty Company (hereinafter referred to as `Hardware Mutual') insured William H. Clausen. Clausen, at the time of the automobile accident complained of, was an employee of the Minneapolis, St. Paul Sault Ste. Marie Railroad Company (hereinafter referred to as `Soo Line') and was in the course of his employment when the accident occurred. Plaintiff at the time he was injured rode with Clausen and was also an employee of the Soo Line at the time of injury and was in the course of his employment. Soo Line is an interstate railroad.

"Plaintiff claims that he was injured as the result of the negligent operation by Clausen, who is now deceased, of his car at and about the time and place of the accident.

"The policy of insurance provided that the named insured was William H. Clausen. It insured him `subject to the limits of liability, exclusions, conditions, and other terms of this policy' by agreeing (Coverage A) `To pay on behalf of the insured all sums which the insured shall become obligated to pay by reason of the liability imposed upon him by law for damages . . . because of bodily injury . . . sustained by any person . . . caused by accident and arising out of the ownership, maintenance, or use of the automobile.'

"The policy provides, `Definition of "Insured." The unqualified word "insured" wherever used in coverages A and B and in other parts of this policy, when applicable to such coverages, includes the named assured and, except where specifically stated to the contrary, also includes any person while using the automobile and any person or organization legally responsible for the use thereof . . . .'

"The policy under the heading `Exclusions,' expressly provided: `This policy does not apply: . . . d. under coverages A and K, to bodily injury to or death of any employee of the insured while engaged in the employment, other than domestic, of the insured, or while engaged in the operation, maintenance, or repair of the automobile.'

"The accident occurred in 1944 and hence is covered by the statutes of 1943."

BROWN, J.

sec. 204.30 (3), Stats., has remained unchanged since 1943. Numerous cases have come before us requiring its interpretation and have resulted in decisions which it now seems impossible to reconcile. In such a situation we consider it advisable to re-examine the statute with as little bias as possible because of what we have said on other occasions. So viewed, and in the light of our experience with many cases which have presented various aspects of the problems which the statute is designed to treat, we conclude that by the purchase and sale of a policy such as the one described in the foregoing statement of facts the insurer and the named insured have agreed that the latter shall not have insurance against claims brought by his own employees against him. By the "Definition of `Insured'" in the policy and by the omnibus coverage of sec. 204.30 (3) incorporated in the policy by law, the indemnity which the named insured has is extended to apply in the same manner and under the same provisions as it is applicable to the named assured to those who operate the automobile with the named assured's consent, and also to those who are legally responsible for its operation, provided that operation is with the consent of the named assured. That is, assuming such consent, just as the named assured has no insurance protection if the claim is by his own employee but is protected against the claims of all others, so an additional insured has no protection when the claim is by his employee but is protected against the claims of persons not so related to him, no matter who else may be the employer of the claimant.

Insurance companies have consistently attempted to limit their liability by proposing that if any possible party against whom the injured person might have made a claim was such person's employer, then the actual defendant, regardless of such relationship, is excluded from coverage. We do not think that this was the intent of the legislature when it enacted sec. 204.30 (3), Stats., nor that such a result is required by the language of that section.

To direct our attention to the instant case, Clausen bought a policy which did not provide coverage for him if claim was made arising from the bodily injury or death of any of his employees while engaged in the employment but which did protect him against the claims of others. Sandstrom was such another and the insurer must give to Clausen the protection specified. If Sandstrom had sued the Soo Line, as the principal of Clausen, the tort-feasor, the insurer would not have had to protect that defendant since it had covenanted not to insure against claims brought by the employee of the party calling for protection. The lack of coverage accorded the actual employer of the plaintiff cannot be carried over to withdraw protection when the claim is made by the employee of any other than the party against whom the action is brought. Accordingly, Clausen's insurer, Hardware Mutual Casualty Company, must protect him to the limits of its policy against the claim of Sandstrom who was not his employee, and the learned trial court committed no error in denying the company's motion for summary judgment dismissing plaintiff's complaint against it. It has been urged upon us that Narloch v. Church (1940), 234 Wis. 155, 290 N.W. 595, and Vick v. Brown (1949), 255 Wis. 147, 38 N.W.2d 716, have already overruled Brandt v. Employers' Liability Assur. Corp. (1938), 228 Wis. 328, 280 N.W. 403. Whether they did or not, we recognize and expressly state that our instant decision does so.

By the Court. — Order affirmed. Cause remanded for further proceedings according to law.

SANDSTROM v. ESTATE OF CLAUSEN