The Wisconsin Court of Appeals has ordered a Rhinelander dealership's insurance company to defend a suit stemming from a fatal accident involving a loaner car.
The court ruled that the dealership's $6.5 million garage liability and excess insurance polices cover the crash in which a customer and a passenger in another vehicle died.
The customer had agreed orally to buy the loaner while her vehicle was being repaired but had not signed the contract or transferred her trade-in before the crash, meaning the loaner still belonged to Northwoods Ford-Lincoln-Mercury Inc., the court said.
In December 1995, Julie Johnson brought her Mazda pickup to Northwoods for repairs and was given a used 1995 Ford Taurus to drive in the meantime.
A few days later, she decided to buy the Taurus and negotiated a purchase price that included a trade-in on her pickup.
A purchase contract was drawn up, but she did not sign it before the accident in which the Taurus collided with a van. Johnson and a child in the van died; four other people in the van were injured.
The victims sued Johnson's own auto insurer under her $50,000/ $100,000 liability policy. They also sued Northwoods' insurer, Universal Underwriters Insurance Co.
Wisconsin law allows such a suit to be filed directly against an insurance company without naming the vehicle owner as a co-defendant, lawyers said.
The claim was based solely on Northwoods' status as the owner, according to Rhinelander lawyer Jim Weis, who represents the plaintiffs. 'The dealership wasn't negligent at all,' he said.
In a pretrial opinion, Oneida County Circuit Judge Robert Kennedy ruled that the garage operations provision of Universal's policy provides $500,000 in auto liability coverage and $6 million in excess liability coverage.
The Court of Appeals unanimously upheld that decision. Appeals Judge Thomas Cane said ownership of the Taurus had not passed to Johnson.
Under Wisconsin law, ownership transfers only when the parties sign a contract or when the dealer accepts a down payment, deposit or title for the trade-in from the prospective customer, none of which had occurred.
The court also found that the garage operations provision of the policy - which did not exclude auto accidents - applies because loaning the car to Johnson was connected with Northwoods' business.
The insurance company's lawyer, David Hutchinson of Milwaukee, said his client is appealing further because the ruling directly conflicts with a decision by a different Appeals Court panel in a separate case.
In that case, he said, the court determined that his client's policies 'provided no coverage for a customer using a loaner car.'
Weis, the plaintiffs' attorney, said the case now returns to the lower court for trial on the amount of damages.