The Wisconsin Supreme Court recently held in Casper v. American International South Insurance Co., 2011 WI 81 (July 19, 2011), that an insurer may be sued directly by the claimant when the claimant is involved in an incident that takes place in Wisconsin, even if the policy was not issued and delivered in Wisconsin. Wisconsin, as one of a handful of states that permit a claimant to file an action directly against the defendant’s insurer, now may see a greater number of direct actions against insurers.
As background, a truck driven by an employee of Transport Leasing/Contract Inc. (“TLC”) collided with a minivan, seriously injuring the passengers in the minivan. The passengers filed suit against TLC’s excess insurer, National Union Fire Insurance Company of Pittsburgh, PA (“National Union”). The Wisconsin Supreme Court considered, in pertinent part, whether the passengers could maintain a direct action against National Union, even though the liability policy was neither delivered nor issued for delivery in Wisconsin. The Court of Appeals had granted summary judgment in favor of National Union on the basis that the passengers could not maintain such action under Wis. Stat. §§ 631.01(1) and 632.24. The Court of Appeals relied on Kenison v. Wellington Insurance Co., 218 Wis. 2d 700, 582 N.W.2d 69 (Ct. App. 1998).
The Wisconsin Supreme Court reversed and found that Wis. Stat. § 632.24 allowed for direct actions based on insurance policies delivered or issued for delivery outside Wisconsin. Notably, this statute provides, “Any . . . policy of insurance covering liability to others for negligence makes the insurer liable . . . to the persons entitled to recover against the insured for the death of any person or for injury to persons or property, irrespective of whether the liability is presently established or is contingent and to become fixed or certain by final judgment against the insured.” The Supreme Court characterized this language as “exceptionally inclusive.”
National Union argued that Wis. Stat. § 631.01(1) requires a narrower view. That statutory provision states “… This chapter and ch. 632 apply to all insurance policies . . . delivered or issued for delivery in this state, on property ordinarily located in this state, on persons residing in this state when the policy . . . is issued, or on business operations in this state.” National Union maintained that this provision required that the policy be delivered or issued for delivery in Wisconsin as a threshold prerequisite, relying on Kension. However, the Supreme Court adopted the claimant’s disjunctive reading of the provision, i.e., that any of the four conditions may be met in order for a direct action to be maintained. Thus, the Supreme Court announced the new rule (thereby overruling Kension) that Wis. Stat. § 632.24 “applies to any policy of insurance coverage liability, irrespective of whether that policy was delivered or issued for delivery in Wisconsin, so long as the accident or injury occurs in this state.”
Going forward, even though an insurer may be able to price a policy based on where it is issued and delivered, the fortuitous occurrence of an incident in a state, such as Wisconsin, may force the insurer into the unenviable position of having to litigate directly against the non-judgment creditor claimant. Does this decision cause insurers to increase premium rates if insureds do significant business in Wisconsin, even though the insured’s principal place of business is not in Wisconsin, and the policy is not issued or delivered in Wisconsin?