Litigation of the Absurd – Employee’s Negligence Must Be Defended and Paid For by Injured Customer’s Insurance
Legal results can be confusing. Sometimes, they can even defy common sense. Case in point: what if an employee injures a customer? One would expect the employer or its insurer would have to defend the lawsuit and possibly compensate the customer. However, a recent Wisconsin Court of Appeals case flips this notion on its head. In Blasing v. Menards, the court ruled that the injured customer’s insurer must defend the company and indemnify it against any loss.
Injury occurs in the scope of duties
Vicki Blasing purchased lumber from a Menards store in Jefferson, Wisconsin. She drove her pickup truck to the lumber yard of the store, where a Menards employee used a forklift to load the lumber. During the loading process, a piece of lumber fell from the forklift, injuring Blasing’s foot.
Blasing brought suit against Menards for her injury, alleging that the Menards employee had been negligent. Two insurance policies were in place at the time of the accident. Blasing had an auto insurance policy with American Family Insurance and Menards carried a general liability policy through Zurich American Insurance Company.
Menards argued it was Blasing’s auto insurance policy that should have to defend it. American Family called it an absurd outcome to have the insured’s policy defend the negligent employee or potentially pay for the injury from her own policy.
The Wisconsin Court of Appeals ruled in favor of Menards.
Wisconsin auto insurance law provides coverage for the ‘permissive user’ of a vehicle
The Court of Appeals reached its conclusion based on Wisconsin Statute 632.32. The statute requires insurers to protect individuals who are allowed to use a vehicle. These “permissive users” must then be provided a defense and protected from loss. So was the Menard’s employee a permissive user of Blasing’s truck, especially when he was using the company’s forklift to transfer materials?
The Court of Appeals cited a number of cases where loading and unloading a vehicle resulted in permissive use, including one where a bobcat was used to load a part into a pickup truck. In this case, it was undisputed that the employee had permission to use Blasing’s truck and therefore, the Court considered the employee and Menards permissive users.
Isn’t this just “absurd”?
American Family argued that even though the employee was a permissive user, Wisconsin Supreme Court precedent allowed the court to disregard the statute, because it would produce an absurd result that the legislature could not have intended. The court was not persuaded.
In reaching its conclusion, the court presented an example where American Family would have to defend and indemnify another driver who was using Blasing’s car and ran over her foot. It saw no meaningful distinction between a driver who is loaned a vehicle versus an employee who is using a vehicle for loading or unloading.
The court characterized American Family’s position as arguing for fairness, rather than one avoiding an absurd legal outcome. Writing for the court, Judge Paul Lundsten stated: “If this is a result the legislature does not desire, it should amend the… statute to prevent such results in the future…until then we are bound by the statute.”
The Court’s decision is important for employers for several reasons:
1) For employers without general liability insurance, potential litigation costs and liability for employees’ negligent acts may be covered by another insurer.
2) Even employers with liability insurance may be spared a loss under their policy.
3) If insurance companies write policy language excluding such incidents from permissive use, the statute would trump the policy and the exclusion would be invalid.
You can read the complete decision by clicking here.