Court: Wisconsin Supreme Court; January 18, 2012; Wisconsin; State Supreme Court
John Thorson held primary and umbrella insurance policies with Progressive Casualty Insurance Co. Progressive informed him a month before the umbrella policy's expiration that it would not renew the existing policy due to an administrative change, stating that coverage would instead be provided by Artisan Truckers Casualty Co., a Progressive subsidiary. Thorson was advised that he did not need to take any action and was informed that his current umbrella policy lacked uninsured/underinsured motorist (UM/UIM) coverage, but he could purchase $500,000 in UM/UIM coverage.
Thorson contacted his agent, Sandra Anson, to secure this UM/UIM coverage, which Anson confirmed with Progressive. Thorson was told to wait for a premium bill. Shortly thereafter, Thorson's daughter was injured in a car accident caused by an uninsured motorist. Although Progressive and Artisan issued the new umbrella policy with the requested UM/UIM coverage, its effective date was two days post-accident and eleven days after confirmation of the coverage.
Progressive and Artisan later filed a declaratory judgment action claiming no coverage for the accident injuries due to policy lapse for nonpayment. Thorson counterclaimed for breach of contract and failure to timely pay a claim, while also cross-claiming against Anson for negligence and misrepresentation. Anson sought to reform the umbrella policy to include UM/UIM coverage, asserting she had authority to bind coverage under the producer's agreement with Progressive, and requested indemnification.
The circuit court dismissed Thorson's claims against Progressive, ruling that the umbrella policy was not active at the time of the accident and that Thorson was applying for a new policy, not renewing an existing one. After Thorson and Anson settled, Progressive was granted summary judgment against Anson based on the election of remedies doctrine. Thorson and Anson appealed, and the court reversed the decision, ruling that Progressive was bound by its actions and Anson's actions, and that the election of remedies doctrine did not apply in this case.
On September 20, 2008, Progressive provided Thorson with a "Personal Umbrella Insurance Coverage Summary" indicating a renewal but listed Artisan as the underwriter. Despite stating that no renewal offer would be made, Progressive sent a "renewal bill" on the same day, indicating that the policy was underwritten by Artisan. Thorson was not required to apply for insurance with Artisan. The renewal bill featured Progressive’s branding, consistent with prior communications.
Progressive informed Thorson that his current umbrella policy lacked UM/UIM coverage but offered him the option to purchase such coverage in amounts of $500,000 or $1 million. Thorson inquired about adding this coverage through his agent, Anson, who was unaware of the administrative change to Artisan. Anson obtained quotes from Progressive on October 13, 2008, and Thorson agreed to purchase $500,000 of UM/UIM coverage, effective October 22, 2008, with payment instructions to wait for a new invoice.
On October 14, 2008, Anson confirmed the purchase with Progressive, which acknowledged that the policy was in force with the added coverage. Following a car accident involving Thorson’s daughter on October 23, 2008, Thorson contacted Anson to report the incident and pay the premium, although he had not yet received an invoice. The policy with UM/UIM coverage was officially issued on October 25, 2008.
After the dismissal of Thorson’s counterclaims, he settled with Anson’s insurer for $500,000 in exchange for an assignment of claims against Progressive and Artisan. Progressive subsequently sought summary judgment against Anson, which was granted by the circuit court. Thorson, Anson, and Anson's insurer appealed the decision. The court noted that the interpretation of an insurance contract is a legal question reviewed de novo. The circuit court found that the umbrella policy was not in effect on October 23, 2008, due to non-payment of the premium and ruled that Thorson was applying for a new policy rather than renewing an existing one, a conclusion with which the appellate court disagreed.
Progressive was bound by its actions and those of its agent, Anson, who was authorized to "bind coverage" for umbrella policies. Progressive informed Thorson he could purchase $500,000 or $1 million of UM/UIM coverage and directed him to contact Anson for assistance. Following this guidance, Thorson purchased $500,000 of UM/UIM coverage on October 13, 2008, with Progressive confirming this coverage with Anson on October 14, 2008. Importantly, Progressive did not require immediate payment, instructing Thorson to await an invoice.
Wisconsin Statute 631.09(2) indicates that an insurer remains obligated under a policy despite the policyholder's failure to act if such failure was caused by the insurer's agent. Therefore, since Thorson was not obligated to pay the premium by October 22, 2008, due to Progressive's instructions, the coverage remained valid. Additionally, Wisconsin Statute 628.40 holds insurers accountable for their agents' actions within the scope of apparent authority.
Thorson acted correctly throughout the process, having received a "nonrenewal notice" but also a "renewal bill" and reminder for payment by October 22, 2008. After contacting Anson for quotes and agreeing to the coverage, he was told to wait for an invoice. Confirmation of the policy and coverage was received before October 23, 2008, and Thorson had not received any invoice by that date. Thus, the $500,000 of UM/UIM coverage was deemed in force as of October 22, 2008.
The circuit court's dismissal of Thorson's and Anson's counterclaims against Progressive and Artisan was found to be in error, leading to a reversal and remand for a new trial on those issues. Additionally, the court's application of the election of remedies doctrine was reversed. Wisconsin courts typically limit this doctrine to cases involving unjust enrichment, misleading actions, or inequity, primarily to prevent double recovery. Since double recovery is not expected in this case, the election of remedies doctrine does not apply.
The court referenced Scheideler v. Smith Assocs. Inc., where the plaintiffs, the Scheidelers, had multiple insurance coverages but lost certain protections due to an agent's error. After a denial of UIM benefits by General Casualty, the Scheidelers sued both the insurance agency and General Casualty for various claims. They settled with General Casualty for the policy's maximum amount, retaining their bad faith claim against General Casualty while dropping other claims.
The court observed that insured individuals can either sue their insurer for policy reformation or their agent for negligence but cannot recover from both once a judgment is obtained against the insurer. In Scheideler, since the settlement equaled the maximum coverage, it extinguished the negligence claim against the agency, justifying the application of the election of remedies doctrine. The key distinction in Scheideler was that the Scheidelers retained their bad faith claim against General Casualty after receiving full coverage, which did not prejudice General Casualty as it acknowledged it would have provided the coverage if not for the agency's mistake.
Coverage was determined to be in effect on the day of the accident, leading to the circuit court's dismissal of Thorson’s and Anson’s claims against Progressive, which included Thorson’s extra-contractual damages and coverage claims. Thorson has settled with Anson and is not entitled to recover $500,000 of uninsured motorist (UM) coverage from Progressive but retains the right to pursue extra-contractual damages upon remand. Allowing this pursuit will not lead to unjust enrichment or double recovery, thus the election of remedies doctrine is not applicable.
Anson retains the right to seek contribution or indemnification from Progressive, which serves to shift the full responsibility for a loss to another party deemed responsible. The indemnification can be based on either contractual or equitable grounds. In a principal-agent scenario, an agent acting within their duty is entitled to indemnification from the principal for damages incurred, as reflected in the agreement between Progressive and Anson, which stipulates that Progressive will indemnify Anson for losses resulting from its negligence.
The election of remedies doctrine does not affect Anson’s contractual right for indemnification. Unlike the case of Scheideler, where coverage owed was not influenced by an agency error, Anson’s situation involves an allegation of negligence by Progressive leading to her financial losses. A jury will determine if Progressive's negligence caused the $500,000 in damages claimed by Anson.
The circuit court's judgment and order are reversed, reinstating Thorson and Anson's counterclaims against Progressive and Artisan. Thorson cannot seek $500,000 in coverage from Progressive but may pursue extra-contractual damages, while Anson can seek indemnification from Progressive. The case is remanded with specific instructions, and an interlocutory appeal from Thorson, Anson, and Anson's insurer was denied.
