Title: Vearl Miller v. The Hanover Insurance Co.
Citation: 2010 WI 75
Docket Number: 2008AP001494
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: July 13, 2010

2010 WI 75 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2008AP1494 
COMPLETE TITLE: 
 
 
Vearl Miller, Wanda Miller and Ross, Dayne and 
Wade Miller, by Guardian ad Litem Robert 
Mubarak, 
          Plaintiffs-Appellants-Cross-
Respondents-Cross Petitioners, 
     v. 
The Hanover Insurance Company and Massachusetts 
Bay Insurance Company, 
          Defendants, 
Zurich American Insurance Company, 
          Defendant-Respondent-Cross-Appellant-
Petitioner. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
Reported at: 321 Wis. 2d 240, 773 N.W.2d 225 
(Ct. App. 2009-Unpublished) 
 
 
OPINION FILED: 
July 13,2010   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
April 15, 2010   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Monroe   
 
JUDGE: 
Michael J. McAlpine   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
BRADLEY, J., concurs (opinion filed). 
ABRAHAMSON, C.J., joins concurrence.   
 
DISSENTED: 
        
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For 
the 
defendant-respondent-cross-appellant-Petitioner 
there were briefs by Craig W. Nelson and Nelson, Connell, 
Conrad, Tallmadge & Slein, S.C., Waukesha, and Lester A. Pines, 
Kira E. Loehr, and Cullen Weston Pines & Bach LLP, Madison, and 
oral argument by Lester A. Pines. 
 
For 
the 
plaintiffs-appellants-cross-respondents-cross 
petitioners there were briefs by Jay A. Urban, Jennifer M. 
Wilson, and Urban & Taylor S.C., Milwawukee; Kent A. Tess-
Mattner 
and 
Schmidt, 
Rupke, 
Tess-Mattner 
& 
Fox, 
S.C., 
Brookfield; and Robert J. Mubarak and Mubarak, Radcliffe & Berry 
SC, Tomah, and oral argument by Jay A. Urban. 
 
 
2 
An amicus curiae brief was filed by James A. Friedman, 
Katherine Stadler, and Godfrey & Kahn, S.C., Madison, on behalf 
of the Wisconsin Insurance Alliance. 
 
 
 
 
2010 WI 75
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.    2008AP1494 
(L.C. No. 
2004CV212) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Vearl Miller, Wanda Miller and Ross, Dayne and 
Wade Miller, by Guardian ad Litem Robert 
Mubarak,   
 
 
Plaintiffs-Appellants-Cross- 
 
Respondents-Cross Petitioners,   
 
 
v. 
 
The Hanover Insurance Company and Massachusetts 
Bay Insurance Company,   
 
 
Defendants,   
 
Zurich American Insurance Company, 
 
Defendant-Respondent-Cross-Appellant- 
Petitioner. 
FILED 
 
JUL 13, 2010 
 
A. John Voelker 
Acting Clerk of 
Supreme Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Reversed and 
remanded to the circuit court for further proceedings.   
 
¶1 
PATIENCE DRAKE ROGGENSACK, J.   We review a decision 
of the court of appeals1 affirming the circuit court's order2 
                                                 
1 Miller v. Hanover Ins. Co., No. 2008AP1494, unpublished 
slip op., ¶13 (Wis. Ct. App. July 30, 2009). 
2 The Honorable Michael J. McAlpine of Monroe County 
presided. 
No. 
2008AP1494   
 
2 
 
denying Zurich American Insurance Company's (Zurich) motion for 
relief from a default judgment and limiting Vearl Miller, Wanda 
Miller and Ross, Dayne and Wade Miller's (collectively, Miller) 
damages to $2 million.  The following issues are presented for 
our review:  (1) whether the circuit court properly entered a 
default judgment against Zurich for its failure to timely answer 
Miller's amended complaint; (2) whether the circuit court 
erroneously exercised its discretion in denying Zurich's motion 
for relief from the default judgment, pursuant to Wis. Stat. 
§ 806.07(1)(h) (2007–08);3 and (3) whether the circuit court 
properly limited Miller's damages to $2 million. 
¶2 
We 
conclude 
that 
the 
circuit 
court 
erroneously 
exercised its discretion in denying Zurich's motion for relief 
from the $2 million default judgment.  Because we so conclude, 
we need not decide whether the circuit court properly entered 
the default judgment against Zurich or whether the circuit court 
properly limited Miller's damages to $2 million.  Accordingly, 
we reverse the court of appeals decision affirming the circuit 
court's denial of Zurich's motion for relief from judgment and 
remand to the circuit court to vacate the default judgment. 
I.  BACKGROUND 
¶3 
The facts of this case are lengthy and complicated.  
On August 11, 2003, Vearl Miller (Vearl) was injured in a car 
accident in the course of his employment.  While operating a 
                                                 
3 All further references to the Wisconsin Statutes are to 
the 2007–08 version unless otherwise indicated. 
No. 
2008AP1494   
 
3 
 
vehicle owned by General Parts, Inc. (General Parts), the parent 
company of Vearl's employer, Car Quest, Vearl was struck by 
another vehicle.  James Smith, Jr. (Smith) was the driver of 
that vehicle.  As a result of the accident, Vearl suffered 
traumatic injuries, including permanent paralysis from the waist 
down. 
¶4 
On June 23, 2004, Vearl and his wife, Wanda Miller 
(Wanda), filed a complaint, alleging Smith's negligence.  The 
complaint claimed damages for Vearl's injuries and for Wanda's 
loss of consortium and society and companionship.  The complaint 
named four defendants:  (1) Smith; (2) Smith's insurer, Acuity 
Insurance (Acuity); (3) Zurich, as General Parts' worker's 
compensation insurer; and (4) the Hanover Insurance Company 
(Hanover), as Vearl's personal underinsured motorist insurer.  
Zurich was named as a defendant because it had a statutory 
subrogation interest in any tort recovery. 
¶5 
On July 9, 2004, Zurich timely answered the complaint, 
by and through its attorney, James Ratzel (Ratzel).  Zurich 
affirmatively asserted a subrogation interest "to the full 
extent of any worker's compensation benefits that have been paid 
or will be paid to or on behalf of the plaintiff Vearl Miller."   
¶6 
On November 11, 2004, Miller's counsel wrote a letter 
to Ratzel, which stated in part:  
My understanding is that you are representing 
Zurich in a subrogation capacity, but are you also 
counsel 
on 
the 
potential 
[underinsured 
motorist] 
claim?  If so, kindly provide me with any and all 
certified policies of possible [underinsured motorist] 
coverage, including umbrella and [commercial general 
No. 
2008AP1494   
 
4 
 
liability] 
policies, in effect for Vearl Miller 
through Car Quest or General Parts, Inc. at the time 
of this accident.  If not, please forward this to the 
appropriate counsel for Zurich.  Actually, we are most 
interested in all [underinsured motorist] policies in 
effect for Mr. Miller as an employee driver. 
¶7 
Ratzel responded to the letter from Miller's counsel 
on November 15, 2004.  The letter stated:  
I understand that you are appearing as co-counsel 
for the plaintiffs in this matter.  In response to 
your letter of November 11, 2004, I only represent 
Zurich to the extent of the worker's compensation 
interest.  I don't know if the issue of [underinsured 
motorist] coverage has ever been explored.  In my 
discussions, I am not aware of anyone raising that 
issue and as such, I cannot state one way or another 
whether there is [underinsured motorist] coverage.  As 
to the position of Acuity, they have offered their 
policy limits from day one and I believe that the only 
thing that is taking place right now is obtaining some 
additional proceeds from the tortfeasor Smith. 
Please contact me with any questions or comments.  
As you are aware, my worker's compensation interest 
attaches to the policy limits of Acuity but would not 
come into play as it pertains to any [underinsured 
motorist] claim.  Thank you. 
¶8 
Miller's counsel corresponded with GAB Robins Risk 
Management Services, Inc. (GAB Robins), a third-party claims 
administrator for General Parts, on December 13, 2004, and 
December 27, 2004, regarding obtaining certified copies of any 
insurance policies containing underinsured motorist coverage 
Zurich had issued to Car Quest or General Parts.  On January 6, 
2005, Attorney Timothy Lyons (Lyons) sent a letter to Miller's 
counsel informing him, among other things, that his "law firm 
[had] been retained by GAB Robins Risk Management Services, 
Inc., with regard to [Vearl Miller's] claim."  Lyons again 
No. 
2008AP1494   
 
5 
 
corresponded with Miller's counsel on February 1, 2005.  This 
letter was to inform Miller's counsel that while Zurich had 
issued General Parts a commercial automobile insurance policy, 
it was GAB Robin's position that "there is no [underinsured 
motorist] coverage" in the commercial automobile policy covering 
Miller because General Parts rejected Zurich's offer of such 
coverage.  Enclosed with the letter was "the form signed by the 
representative of General Parts, Inc. rejecting [underinsured 
motorist] coverage."4 
¶9 
Acuity agreed to pay its policy limit of $100,000, and 
Smith contributed $2,000 to a settlement fund.  A dispute arose 
over how the funds were to be distributed.  On January 18, 2005, 
Zurich, through Ratzel, filed a motion for approval of third 
party settlement proposing a distribution. 
¶10 Eventually, the parties stipulated to an agreed on 
distribution of the settlement proceeds.  Miller's counsel filed 
                                                 
4 Contrary to the concurrence's suggestion that Lyons 
"appeared to be representing Zurich's [underinsured motorist] 
interest," concurrence, ¶93, the record conclusively establishes 
that Lyons did not represent Zurich in any capacity.  In an 
affidavit, Lyons averred: 
I am the attorney for GAB Robins . . . .  [] I have 
never entered an appearance in this case, as neither 
GAB Robins nor General Parts/CarQuest have been a 
party to this case.  [] I have not represented Zurich 
in this case.  [] I have never personally communicated 
in any way with any representative of Zurich in 
connection with this case. 
Accordingly, we disagree with the concurrence's assertion that 
Lyons represented Zurich on the underinsured motorist claim. 
No. 
2008AP1494   
 
6 
 
a letter in the circuit court, dated February 10, 2005, copying 
all counsel of record, including Ratzel, asking the court to 
sign and approve a stipulation and order for disbursement of the 
settlement proceeds and a stipulation and order for partial 
dismissal of parties.  All counsel of record, including Ratzel 
for Zurich, signed the stipulations.  On February 11, 2005, the 
court entered both orders. 
¶11 The order for partial dismissal stated "that only the 
defendants James L. Smith, Jr. and Acuity Insurance are hereby 
dismissed as defendants in the above matter with prejudice and 
without costs."  With respect to Zurich and Hanover as the 
remaining defendants, Miller's February 10, 2005 letter to the 
court explained: 
We are keeping this case open as to all other named 
defendants.  
There are potentially other claims 
involving 
these 
defendants 
and 
other 
issues 
of 
[underinsured motorist insurance], insurance agent 
errors 
and 
omissions 
and/or 
medical 
malpractice.  
Thank you. 
¶12 In November 2005, the circuit court issued a notice of 
hearing setting a scheduling conference for January 10, 2006.  
The notice was distributed to Miller's counsel, Hanover's 
counsel and to Zurich.  The notice was not distributed to 
Ratzel, and he did not attend the scheduling conference. 
¶13 On January 10, 2006, the day of the scheduling 
conference, Miller's counsel sent a letter to the circuit court 
informing the court of the status of the case.  The letter 
stated:  "Kindly keep this case open for future proceedings, and 
we will expect to have additional motions and/or pleadings in 
No. 
2008AP1494   
 
7 
 
the case within the next couple of months."  A copy of this 
letter was sent to Miller's co-counsel and Hanover's counsel.  
Neither Zurich nor Ratzel received this letter.  The judge made 
the following handwritten notations on a copy of the January 10, 
2006 letter:  "request approved," which was circled, "please 
advise" and "please file."  A copy of the letter with the 
judge's notations was sent to Miller's co-counsel and Hanover's 
counsel; neither Zurich nor Ratzel received a copy. 
¶14 Miller's counsel filed with the circuit court a letter 
dated June 5, 2006, enclosing an amended summons and complaint, 
which were filed on June 7, 2006.  The letter informed the court 
of the following:  
Enclosed is our Amended Summons and Complaint making 
claims for additional coverage and/or reducing clause 
issues on those, as well as other contractual and 
extra-contractual claims for damages, including bad 
faith.  Two of these insurers are new parties to this 
action, and all will be served via their respective 
registered agents. 
The amended complaint named Massachusetts Bay Insurance Company 
(Massachusetts Bay), Zurich and Hanover as defendants and 
claimed, 
inter 
alia, 
that 
Zurich's 
commercial 
automobile 
insurance policy provided Miller, as an insured, underinsured 
motorist coverage.  Contrary to the above-quoted letter, the 
amended complaint added only one new party because Zurich and 
No. 
2008AP1494   
 
8 
 
Hanover were never dismissed as defendants.5  A copy of this 
letter was sent to Miller's co-counsel, Hanover's counsel and 
Lyons; neither Ratzel nor Zurich received a copy. 
                                                 
5 At various times throughout this proceeding, Miller's 
counsel has argued that Zurich was dismissed from the case after 
the worker's compensation claim was resolved, citing to an order 
for dismissal and disbursements pursuant to Wis. Stat. § 102.29 
entered by the circuit court on January 17, 2006.  This order 
enumerated the same distribution of settlement proceeds as the 
court's February 11, 2005 order for disbursement of settlement 
proceeds and stated that "after the provisions of the above 
agreement have been effectuated, the above-entitled action shall 
be dismissed as it pertains to the defendants with prejudice and 
without costs and that an Order to that effect may be entered 
without notice."  Attached to the order for dismissal is a note 
dated January 19, 2006, which states "Case remains open for 
future proceedings."   
This order was mistakenly entered by the circuit court and 
was not sent to the parties or to counsel.  Indeed, at the 
hearing on Zurich's motion for extension of time to file its 
answer and Miller's motion for default judgment, the following 
exchange occurred: 
 
[Court]:  As I indicated the other day, [the 
January 17, 2006 order] obviously was in error and 
that order that dismissed Zurich with prejudice in 
error is vacated. 
. . .  
 
[Attorney Craig Nelson for Zurich]:  With respect 
to the Court's order that the January 17, 2006, order 
is vacated, do I——do I understand properly that that 
order is vacated as of today? 
 
[Court]: 
 
Well, actually it was mistakenly 
entered and the order is an order that really I view 
as a nullity since it was mistakenly entered . . . . 
And I also don't believe . . . that that order was 
ever 
provided 
to 
either 
Mr. 
Ratzel 
or 
Mr. 
Mubarak[, Miller's co-counsel,] or anybody else for 
that matter.  So I——and the reason that I say that is 
No. 
2008AP1494   
 
9 
 
¶15 On June 12, 2006, the circuit court issued a notice of 
hearing setting a scheduling conference for June 30, 2006.  The 
notice was distributed to Miller's counsel, Hanover's counsel, 
Massachusetts Bay and Zurich.  The notice was not distributed to 
Ratzel.   
¶16 On June 20, 2006, Miller served the amended summons 
and complaint on Zurich through its registered agent, Stanley 
Lowe.  The amended summons and complaint were never served on 
Ratzel.  On June 22, 2006, the amended summons and complaint was 
forwarded to Caroline Fountain (Fountain), a Zurich employee who 
is 
responsible 
for 
receiving 
suit 
papers 
from 
Zurich's 
registered agent and forwarding them to the appropriate claim 
handler.  In an affidavit, Fountain averred that she mistakenly 
believed the amended summons and complaint were duplicates of a 
summons and complaint she had received six days earlier, which 
she forwarded to GAB Robins.  The summons and complaint involved 
a medical negligence lawsuit the Millers commenced in the same 
court arising out of the same accident, naming Zurich as a 
subrogated defendant.  Because Fountain believed the amended 
                                                                                                                                                             
that I don't know that there would have been anyone 
that would have therefore relied on that order. 
 
The circuit court's order entering default judgment against 
Zurich confirmed the court's comments at the hearing.  The order 
stated that the January 17, 2006 order for dismissal "was not 
distributed to counsel or the parties[,] . . . was made in error 
and is vacated."  Given that the court vacated the January 17, 
2006 order dismissing all defendants from the action and that it 
was not distributed to any of the parties, the order does not 
impact our decision. 
No. 
2008AP1494   
 
10 
 
summons and complaint had already been processed, she did not 
forward the pleadings to GAB Robins as she normally did. 
¶17 On June 30, 2006, the circuit court issued a notice of 
hearing setting a scheduling conference for August 28, 2006.  
The notice was distributed to Miller's counsel, Hanover's 
counsel, Massachusetts Bay and Zurich.   
¶18 Hanover and Massachusetts Bay, represented by the same 
counsel, timely answered the amended complaint on August 4, 
2006.  Because Zurich failed to timely answer the amended 
complaint, on September 1, 2006, Miller filed a motion for 
default judgment against Zurich.  A copy of this motion was sent 
to Miller's co-counsel, counsel for Massachusetts Bay and 
Hanover, Zurich and Lyons. 
¶19 On September 21, 2006, Attorney Craig Nelson (Nelson) 
answered Miller's amended complaint on behalf of Zurich.  In its 
answer, Zurich affirmatively alleged that the policy it issued 
to General Parts did not include any underinsured motorist 
coverage.  On September 26, 2006, Zurich also filed a motion for 
extension of time to answer Miller's amended complaint.  Zurich 
mounted several arguments in support of its motion.  First, 
Zurich argued that the amended summons and complaint were 
improperly served because, pursuant to Wis. Stat. § 801.14(2), 
service must have been made on Ratzel, Zurich's attorney of 
record.  Alternatively, Zurich contended that its "failure to 
act was the result of excusable neglect," citing Wis. Stat. 
§ 801.15(2)(a).  Finally, Zurich argued that the circuit court 
should deny the motion for default judgment because, if granted, 
No. 
2008AP1494   
 
11 
 
the court would be compelled to re-open the judgment under Wis. 
Stat. § 806.07(1)(a) and (h).6  In response, Miller filed a 
motion to strike Zurich's answer to the amended complaint. 
¶20 On December 1, 2006, the circuit court denied Zurich's 
motion for extension of time and granted Miller's motion to 
strike Zurich's answer and motion for default judgment.  The 
court's order for default judgment against Zurich concluded that 
Miller "properly served the Amended Summons and Complaint on 
Zurich pursuant to Wis. Stat. § 801.14 and Wisconsin Law on its 
registered agent, although Attorney Ratzel remained as counsel 
of record for Zurich."  The circuit court further concluded that 
Zurich's failure to timely answer was not the result of 
excusable neglect, but did not address whether "[a]ny other 
reasons justif[ied] relief" from the default judgment, Wis. 
Stat. § 806.07(1)(h).   
¶21 Zurich filed a petition seeking leave to appeal the 
circuit court's non-final order for default judgment against it.  
The court of appeals denied Zurich's petition. 
                                                 
6 Wisconsin Stat. § 806.07(1) provides in relevant part: 
On motion and upon such terms as are just, the court, 
subject to subs. (2) and (3), may relieve a party or 
legal 
representative 
from 
a 
judgment, 
order 
or 
stipulation for the following reasons: 
 
(a) Mistake, inadvertence, surprise, or excusable 
neglect; 
. . .  
 
(h) Any other reasons justifying relief from the 
operation of the judgment. 
No. 
2008AP1494   
 
12 
 
¶22 Zurich moved the circuit court for reconsideration.  
In support of its motion, Zurich submitted an affidavit of 
Nelson, which attached 18 documents, including correspondence 
and pleadings, not sent to or served on Ratzel.  Moreover, 
Nelson averred that after consulting with the Monroe County 
Clerk of Court's office, "it appears that Attorney Ratzel was 
neither added to [nor] deleted from the CCAP system, as counsel 
of record for Zurich, at any time before December 22, 2006."  
Attached to the affidavit was a copy of a CCAP entry for this 
proceeding listing all attorneys of record, for all present and 
dismissed parties, except Ratzel.7  The circuit court denied 
Zurich's motion. 
¶23 Zurich again petitioned the court of appeals seeking 
leave to appeal the circuit court's non-final order denying 
Zurich's 
motion for reconsideration, or, alternatively, a 
supervisory writ of mandamus directing the circuit court to 
grant its reconsideration motion.  The court of appeals denied 
both petitions. 
                                                 
7 A search of the CCAP database on June 1, 2010, lists 
Ratzel as an attorney for Zurich.  CCAP indicates that Ratzel 
entered the action as Zurich's attorney on December 22, 2006, 
and withdrew on November 26, 2007.  CCAP lists Craig Nelson as 
Zurich's attorney and indicates he entered the action on 
September 22, 2006.  No attorney for Zurich is listed prior to 
September 22, 2006.  See Wisconsin Circuit Court Access, 
http://wcca.wicourts.gov/simpleCaseSearch.xsl 
(select 
"Monroe 
County" from drop down menu, enter 2004CV212 in "case number" 
box and click "search") (last visited June 23, 2010). 
No. 
2008AP1494   
 
13 
 
¶24 Zurich then moved for relief from the default judgment 
pursuant to Wis. Stat. § 806.07(1)(h), which the circuit court 
denied.   
¶25 After extensive discovery, the circuit court conducted 
a hearing on damages.  The circuit court awarded $9,666,314.98 
plus costs to Miller.  The court then issued an order limiting 
the amount awarded at the damages hearing to $2 million plus 
costs because Miller's amended complaint sought $2 million in 
underinsured motorist coverage and prorating the damages between 
each of the plaintiffs. 
¶26 Zurich appealed the circuit court's order granting 
default judgment, denying it relief from the judgment and the 
damages award.  Miller v. Hanover Ins. Co., No. 2008AP1494, 
unpublished slip op., ¶13 (Wis. Ct. App. July 30, 2009).  Miller 
cross-appealed from the circuit court's order limiting its 
damages to $2 million and prorating the damage award.  Id. 
¶27 Regarding 
Zurich's appeal, the court of appeals 
concluded that the circuit court properly granted default 
judgment to Miller and properly denied relief from the judgment.  
Id., ¶3.  On Miller's cross-appeal, the court of appeals 
concluded 
that 
because Miller's amended complaint alleged 
Zurich's policy limit was $2 million, Miller is limited to 
recovering that amount.  Id., ¶44.  The court of appeals 
reversed the circuit court's order prorating the damages award.  
Id., ¶46. 
¶28 Zurich petitioned for review, and Miller cross-
petitioned.  We granted review and now reverse. 
No. 
2008AP1494   
 
14 
 
II.  BACKGROUND 
A.  Standard of Review 
¶29 "Whether to grant relief from judgment under Wis. 
Stat. § 806.07(1)(h) is a decision within the discretion of the 
circuit court," which we review under the erroneous exercise of 
discretion standard.  Sukala v. Heritage Mut. Ins. Co., 2005 WI 
83, ¶8, 282 Wis. 2d 46, 698 N.W.2d 610 (citing Franke v. Franke, 
2004 WI 8, ¶54, 268 Wis. 2d 360, 674 N.W.2d 832).  "A circuit 
court does not erroneously exercise its discretion if its 
decision is based on the facts of record and on the application 
of a correct legal standard."  Larry v. Harris, 2008 WI 81, ¶15, 
311 Wis. 2d 326, 752 N.W.2d 279 (citing Hartung v. Hartung, 102 
Wis. 2d 58, 66, 306 N.W.2d 16 (1981)).   
¶30 "We will not reverse a discretionary determination by 
the [circuit] court if the record shows that discretion was in 
fact exercised and we can perceive a reasonable basis for the 
court's decision."  Sukala, 282 Wis. 2d 46, ¶8 (further 
quotation omitted).  We generally look for reasons to sustain a 
circuit court's discretionary determination.  Id.  However, 
where the circuit court sets forth no reasons or inadequate 
reasons for its decision, we will independently review the 
record to determine whether the circuit court properly exercised 
its discretion and whether the facts provide support for the 
court's decision.  Connor v. Connor, 2001 WI 49, ¶38, 243 
Wis. 2d 279, 627 N.W.2d 182. 
No. 
2008AP1494   
 
15 
 
B.  General Principles of Wis. Stat. § 806.07(1)(h) 
¶31 A circuit court's authority to vacate a default 
judgment derives from Wis. Stat. § 806.07.  Larry, 311 Wis. 2d 
326, ¶17.  "Section 806.07(1) lists conditions under which a 
circuit court may exercise its discretion and open a default 
judgment."  Id.  In exercising its discretion in deciding 
whether to vacate a default judgment, the circuit court must be 
cognizant 
of 
three 
general 
considerations. 
 
Dugenske 
v. 
Dugenske, 80 Wis. 2d 64, 68, 257 N.W.2d 865 (1977).  First, 
§ 806.07(1) is remedial in nature and should be liberally 
construed.  See id.8  Second, "the law prefers, whenever 
reasonably possible, to afford litigants a day in court and a 
trial on the issues."  Id.  Third, "default judgments are 
regarded with particular disfavor."  Id.  Indeed, on this last 
point we have stated that "default judgment is the ultimate 
sanction."  Split Rock Hardwoods, Inc. v. Lumber Liquidators, 
Inc., 2002 WI 66, ¶64, 253 Wis. 2d 238, 646 N.W.2d 19.  
Consequently, default judgments ought to attract close scrutiny 
on appellate review.  Id. 
¶32 Paragraphs (a)–(g) describe specific circumstances for 
which relief may be granted; para. (h) "is a 'catch-all' 
provision allowing relief from judgment for 'any other reasons 
justifying relief.'"  Sukala, 282 Wis. 2d 46, ¶9.  In the 
                                                 
8 Dugenske v. Dugenske cites to Wis. Stat. § 269.46, which 
was "replaced by section 806.07, Stats., [and] contains a 
similar provision for relief from judgments."  Dugenske, 80 
Wis. 2d 64, 67 & n.1, 257 N.W.2d 865 (1977). 
No. 
2008AP1494   
 
16 
 
instant 
action, 
Zurich 
contends 
that 
the 
circuit 
court 
erroneously exercised its discretion in refusing to open the 
default judgment under Wis. Stat. § 806.07(1)(h). 
¶33 "Paragraph 
(1)(h) 
'gives 
the 
trial 
court 
broad 
discretionary authority and invokes the pure equity power of the 
court.'"  Id. (quoting Mullen v. Coolong, 153 Wis. 2d 401, 407, 
451 N.W.2d 412 (1990)).  Para. (1)(h) "is to be liberally 
construed to provide relief from a judgment whenever appropriate 
to accomplish justice."  Shanee Y. v. Ronnie J., 2004 WI App 58, 
¶11, 271 Wis. 2d 242, 677 N.W.2d 684.  However, the court should 
not interpret para. (1)(h) so broadly as to erode the concept of 
finality, nor should it interpret it so narrowly that it no 
longer provides relief for truly deserving claimants.  State ex 
rel. M.L.B. v. D.G.H., 122 Wis. 2d 536, 552, 363 N.W.2d 419 
(1985).  "In short, we balance the competing values of finality 
and fairness" in deciding the motion.  Connor, 243 Wis. 2d 279, 
¶27. 
¶34 "To determine whether a party is entitled to review 
under Wis. Stat. § 806.07(1)(h), the circuit court should 
examine the allegations accompanying the motion with the 
assumption that all assertions contained therein are true."  
Sukala, 282 Wis. 2d 46, ¶10 (citing M.L.B., 122 Wis. 2d at 553).  
If the facts alleged constitute extraordinary circumstances such 
that relief may be warranted under para. (1)(h), a hearing must 
be held on the truth of the allegations.  Id.  After determining 
the truth of the allegations and considering any other factors 
bearing on the equities of the case, the circuit court exercises 
No. 
2008AP1494   
 
17 
 
its discretion to decide whether to grant relief from the 
judgment, order or stipulation.  Id.  The party seeking relief 
bears the burden to prove that extraordinary circumstances 
exist.  Id., ¶12 (citing Connor, 243 Wis. 2d 279, ¶28). 
¶35 A court appropriately grants relief from a default 
judgment under para. (1)(h) when extraordinary circumstances are 
present justifying relief in the interest of justice.  M.L.B., 
122 Wis. 2d at 553.  "[E]xtraordinary circumstances are those 
where 'the sanctity of the final judgment is outweighed by the 
incessant command of the court's conscience that justice be done 
in light of all the facts.'"  Sukala, 282 Wis. 2d 46, ¶12 
(quoting Mogged v. Mogged, 2000 WI App 39, ¶13, 233 Wis. 2d 90, 
607 N.W.2d 662) (further internal quotations and citations 
omitted). 
¶36 In exercising its discretion in determining whether it 
should grant relief from a judgment, the circuit court "must 
consider a wide range of factors" in determining whether 
extraordinary circumstances are present, always keeping in mind 
the competing interests of finality of judgments and fairness in 
the resolution of the dispute.  M.L.B., 122 Wis. 2d at 552; 
Sukala, 282 Wis. 2d 46, ¶11.  We have explained that these 
factors include, but are not limited to, the following: 
"whether 
the 
judgment 
was 
the 
result 
of 
the 
conscientious, deliberate and well-informed choice of 
the 
claimant; 
whether the claimant received the 
effective assistance of counsel; whether relief is 
sought from a judgment in which there has been no 
judicial consideration of the merits and the interest 
of 
deciding 
the 
particular 
case 
on 
the 
merits 
No. 
2008AP1494   
 
18 
 
outweighs the finality of judgments; whether there is 
a meritorious defense to the claim; and whether there 
are intervening circumstances making it inequitable to 
grant relief." 
Sukala, 282 Wis. 2d 46, ¶11 (quoting M.L.B., 122 Wis. 2d at 552–
53).   
C.  Application of Wis. Stat. § 806.07(1)(h) 
¶37 Zurich argues that the circuit court erroneously 
exercised its discretion in denying its motion for relief from 
the default judgment pursuant to Wis. Stat. § 806.07(1)(h).  We 
agree. 
¶38 The circuit court held a hearing on Zurich's motion 
for relief from default judgment.  In denying Zurich's motion, 
the circuit court did not identify the equitable balance it was 
to apply or the relevant factors it was to consider when 
deciding a motion under Wis. Stat. § 806.07(1)(h).  The circuit 
court reiterated its interpretation of Wis. Stat. § 801.14(2) 
and that, in its view, Miller properly served the amended 
summons and complaint on Zurich.  The extent of the circuit 
court's consideration of equitable principles was as follows: 
 
[Court]:  I believe that when the default 
judgment was granted to the plaintiff that the law 
said to me that I have to take the averments in the 
complaint as being correct; and although there is a 
claim that this is not something that is done in the 
interest of justice, I'm aware that there is at least 
one other case where the coverage issue, although 
there was some coverage, was not an issue that the 
Court then was able to deal with. 
 
And I believe under the circumstances that the 
unfortunate failure to respond to the amended summons 
and complaint brings us where we are today.  I'm going 
No. 
2008AP1494   
 
19 
 
to deny the motion for relief as has been requested by 
Zurich. 
¶39 Zurich argues that the circuit court failed to 
consider 
the 
appropriate 
factors 
in 
determining 
whether 
extraordinary circumstances are present that justify vacating 
the default judgment.  Zurich argues that the circuit court was 
required to consider a "wide range of factors," including the 
five "interest of justice" factors set forth in M.L.B.  See 
supra ¶36.  As such, Zurich urges us to engage in an independent 
review of the record to determine whether relief from the 
default judgment was appropriate. 
¶40 Conversely, in its brief to this court, Miller argued 
that "the five-factor interests of justice test . . . is not 
controlling in the context of a default judgment."  Citing 
Estate of Otto v. Physicians Insurance Co. of Wisconsin, 2008 WI 
78, 311 Wis. 2d 84, 751 N.W.2d 805, and Hedtcke v. Sentry 
Insurance Co., 109 Wis. 2d 461, 326 N.W.2d 727 (1982), Miller 
contends that in the context of default judgments, the circuit 
court need only consider the interest of justice factors upon a 
finding of excusable neglect.  In Miller's view, because the 
circuit court found that Zurich's failure to answer was not the 
result of excusable neglect, "[b]ased on Otto, no further 
analysis of the interests of justice was necessary or proper."  
We disagree.   
¶41 We 
conclude 
that 
M.L.B., 
and 
subsequent 
cases, 
unambiguously establish that a circuit court is to consider the 
five 
interest 
of 
justice 
factors 
in 
determining 
whether 
No. 
2008AP1494   
 
20 
 
extraordinary 
circumstances 
are 
present 
under 
Wis. 
Stat. 
§ 806.07(1)(h) such that relief from a judgment, including a 
default judgment, is appropriate.  M.L.B., 122 Wis. 2d at 552–
53; see Connor, 243 Wis. 2d 279, ¶41 (applying the five interest 
of justice factors to determine whether the circuit court 
properly exercised its discretion in denying relief from default 
judgment under para. (1)(h)); Johns v. Cnty. of Oneida, 201 
Wis. 2d 600, 607–08, 549 N.W.2d 269 (Ct. App. 1996) (same).  A 
finding 
of 
excusable 
neglect 
is 
not 
required 
under 
the 
extraordinary circumstances test to obtain relief from a default 
judgment under para. (1)(h).  See generally M.L.B., 122 Wis. 2d 
536.  We so conclude for several reasons.  
¶42 First, Miller's reliance on Otto and Hedtcke is 
misplaced.  Both cases involved a motion to enlarge time under 
Wis. Stat. § 801.15(2)(a).  Otto, 311 Wis. 2d 84, ¶¶23, 111–20; 
Hedtcke, 109 Wis. 2d at 467.  Section 801.15(2)(a) provides that 
the court may, on motion, order a period of time enlarged.  "If 
the motion is made after the expiration of the specified time, 
it shall not be granted unless the court finds that the failure 
to act was the result of excusable neglect."  § 801.15(2)(a) 
(emphasis added).   
¶43 Miller is correct in pointing out that both Otto and 
Hedtcke state that a motion to enlarge time may be granted if 
the circuit court makes a finding of excusable neglect "'and if 
the interests of justice would be served by the enlargement of 
time.'"  Otto, 311 Wis. 2d 84, ¶114 (quoting Hedtcke, 109 
Wis. 2d at 468).  The requirement that the circuit court make a 
No. 
2008AP1494   
 
21 
 
finding of excusable neglect in order to grant a motion to 
enlarge time after the expiration of the specified time is 
derived from the plain language of Wis. Stat. § 801.15(2)(a).  
However, § 801.15(2)(a) is not relevant here because we are not 
deciding whether the circuit court properly denied Zurich's 
motion to enlarge time. 
¶44 By contrast, Wis. Stat. § 806.07(1)(h), the statute on 
which Zurich relies for relief from the default judgment, does 
not by its plain language require a finding of excusable 
neglect.  We further note that because § 806.07(1)(a) permits 
relief on a finding of "excusable neglect," requiring a finding 
of excusable neglect under § 806.07(1)(h) would render a portion 
of para. (1)(a) surplusage.  See State ex rel. Kalal v. Circuit 
Court for Dane Cnty., 2004 WI 58, ¶46, 271 Wis. 2d 633, 681 
N.W.2d 110 ("Statutory language is read where possible to give 
reasonable 
effect 
to 
every 
word, 
in 
order 
to 
avoid 
surplusage."). 
¶45 Johns supports our view that a finding of excusable 
neglect is not required for a court to grant relief under Wis. 
Stat. § 806.07(1)(h).  In Johns, the court of appeals was asked 
to determine whether the circuit court erroneously exercised its 
discretion when it denied the Johns' motion for default judgment 
against the County for its failure to timely answer the 
complaint.  Johns, 201 Wis. 2d at 602.  "Johns contend[ed] that 
upon a showing of a failure to answer within the statutory 
period the court is compelled to grant a default judgment unless 
the answering party can demonstrate excusable neglect, citing 
No. 
2008AP1494   
 
22 
 
Hedtcke, 109 Wis. 2d 461, and Martin v. Griffin, 117 Wis. 2d 
438, 344 N.W.2d 206 (Ct. App. 1984)."9  Johns, 201 Wis. 2d at 
604–05.  In rejecting this argument, the court of appeals noted 
that "the [circuit] court denied the default judgment because it 
determined that, if granted, the court would subsequently reopen 
the 
judgment 
based 
on 
the 
existence 
of 
extraordinary 
circumstances under [Wis. Stat.] § 806.07(1)(h)."  Id. at 606.  
It explained:  
The [circuit] court therefore considered whether it 
would reopen a default judgment based on § 806.07, and 
not whether the untimely answer was the result of 
excusable 
neglect.  Therefore, we conclude that 
Hedtcke and Martin are inapposite to the issues before 
us because they deal with excusable neglect and not 
whether a [circuit] court could properly deny a 
default judgment if it determined such a judgment 
would be reopened under § 806.07. 
¶46 Finally, Miller argues that "[t]he five-factor test, 
however, does not comport with default judgments.  If a 
defaulting party can invoke the five-factor test, most of the 
factors are satisfied simply because the issue was never 
joined."  We agree with Miller's assessment that many of the 
factors will weigh in favor of a party seeking relief from a 
default judgment entered for failure to timely answer.  However, 
we do not agree that this supports the argument that the 
interest of justice factors should not be applied when a party 
                                                 
9 Martin v. Griffin, 117 Wis. 2d 438, 442, 344 N.W.2d 206 
(Ct. App. 1984), citing Hedtcke v. Sentry Insurance Co., 109 
Wis. 2d 461, 468, 326 N.W.2d 727 (1982), determined whether the 
defendant's "failure to answer was the result of excusable 
neglect." 
No. 
2008AP1494   
 
23 
 
seeks relief from a default judgment; rather, this is consistent 
with our stated policy that default judgments are "the ultimate 
sanction" and that we regard them "with particular disfavor."  
Split Rock, 253 Wis. 2d 238, ¶64; Dugenske, 80 Wis. 2d at 68. 
¶47 We 
conclude 
that 
the 
circuit 
court 
set 
forth 
inadequate reasons for its decision at the motion hearing.  As 
such, we will independently review the record to determine 
whether there is a basis for the proper exercise of discretion, 
including whether the record provides a reasonable basis for the 
court's decision.  See Connor, 243 Wis. 2d 279, ¶38. 
¶48 In so doing, we conclude that based on the record in 
this case, the circuit court's decision was not reasonable in 
light of the extraordinary circumstances present in this case 
and the numerous errors, procedural and otherwise, that were 
generated in part by plaintiff's counsel and the circuit court 
personnel who were responsible for listing Ratzel as Zurich's 
attorney of record into the CCAP system, see supra ¶22 & note 7.  
Accordingly, we conclude, for the reasons that follow, that the 
circuit court erroneously exercised its discretion when it 
denied Zurich's motion for relief from the default judgment.   
¶49 We begin our discussion by applying each of the five 
interest of justice factors to the facts of this case.  First, 
we look to "whether the judgment was the result of the 
conscientious, 
deliberate and well-informed choice of the 
claimant."  Sukala, 282 Wis. 2d 46, ¶11 (quoting M.L.B., 122 
Wis. 2d at 552).   
No. 
2008AP1494   
 
24 
 
¶50 In Allstate Insurance Co. v. Brunswick Corp., the 
circuit 
court 
entered 
stipulated 
declaratory 
judgments 
dismissing two insurance companies from the underlying action 
because under then-existing law, their policies did not provide 
coverage for the claims asserted.  Allstate, 2007 WI App 221, 
¶2, 305 Wis. 2d 400, 740 N.W.2d 888.  Three years later, we 
overruled the law the parties relied on in stipulating to the 
declaratory judgments.  Id., ¶3.  Brunswick sought relief from 
the judgments under Wis. Stat. § 806.07(1)(h), which the circuit 
court denied.  Id.  In affirming the circuit court's decision, 
the court of appeals analyzed the interest of justice factors.  
Id., ¶¶7–15.  Applying the first factor, the court noted that 
Brunswick was presented with the issue of a declaratory judgment 
to determine whether the policies provided coverage and, upon 
consideration, Brunswick chose to concede that it could not 
defend against the coverage questions.  Id., ¶9.  As such, the 
stipulations were the product of a deliberate, well-informed 
choice.  See id. 
¶51 By contrast, the default judgment in this case was not 
an issue presented to and considered by Zurich.  The default 
judgment was not affirmatively or voluntarily entered into; 
rather, it was the result of a collection of procedural 
irregularities and Zurich's inaction.  It is difficult to 
imagine a situation in which a defendant would welcome a default 
judgment, especially when $2 million is at stake.  Zurich argued 
that the default judgment occurred through no fault of its own.  
Zurich contends that Miller's and the court's failure to inform 
No. 
2008AP1494   
 
25 
 
Zurich's counsel of record of proceedings, correspondence and 
pleadings contributed to the default judgment.   
¶52 Additionally, Zurich answered the amended complaint 17 
days after it received a copy of Miller's motion for default 
judgment. 
 
Throughout 
the 
proceedings, 
Zurich 
vigorously 
defended against the default judgment, including filing two 
petitions in the court of appeals seeking leave to appeal the 
court's non-final orders and a petition for a supervisory writ 
of mandamus.  The record demonstrates that Zurich's failure to 
timely answer the amended complaint was not a deliberate, well-
informed choice.  Accordingly, this factor weighs in Zurich's 
favor. 
¶53 Next, we turn to whether Zurich received the effective 
assistance of counsel.  Sukala, 282 Wis. 2d 46, ¶11.  There was 
a dispute as to whether Ratzel was counsel of record for Zurich 
on the underinsured motorist coverage claim in light of his 
letter to Miller's counsel that he represented Zurich only with 
respect to the worker's compensation claim, or whether his 
representation might extend to any subsequent claims.10  The 
                                                 
10 We do not agree with the concurrence's assertion that 
Ratzel probably could not have represented Zurich on its 
underinsured motorist claim because he faced a conflict of 
interest.  Concurrence, ¶83.  Even if the concurrence were 
correct, that representing an insurer on both a Wis. Stat. 
§ 102.29 claim and an underinsured motorist claim could create a 
conflict of interest, id., ¶88, we see no potential for such a 
conflict in this case. 
No. 
2008AP1494   
 
26 
 
dispute arose because Ratzel's letter is capable of more than 
one interpretation.  However, we note that when the letter was 
sent, no underinsured motorist coverage claim had been made, and 
Ratzel had said that it was his understanding that there was no 
underinsured motorist coverage available from Zurich.  In the 
same letter, Ratzel directed Miller's counsel to "contact [him] 
with any questions or comments."  Miller's counsel made no 
attempt to contact Ratzel.  Furthermore, when the underinsured 
motorist coverage claim was made, Ratzel was not served with a 
copy of the amended complaint.  From this record, we cannot 
conclude that Zurich received the effective assistance of 
counsel in regard to defending against Miller's underinsured 
motorist coverage claim.  Accordingly, this factor weighs in 
favor of Zurich.  
¶54 Third, we look to "whether relief is sought from a 
judgment in which there has been no judicial consideration of 
the merits and the interest of deciding the particular case on 
the merits outweighs the finality of judgments."  Id., ¶11 
(quoting M.L.B., 122 Wis. 2d at 552).  As is the nature of 
default judgments, there has been no judicial consideration of 
the merits of Miller's claim seeking underinsured motorist 
                                                                                                                                                             
Acuity, Smith's insurer, agreed to pay its policy limit of 
$100,000, and Smith contributed $2,000 to a settlement fund on 
Miller's negligence claim.  There was no dispute as to the 
negligence of the tortfeasor, Smith.  Because Smith's negligence 
was undisputed and because Acuity offered its full policy limit, 
thereby removing the potential for Zurich to receive more money, 
there is no potential for a conflict of interest under the facts 
of this case. 
No. 
2008AP1494   
 
27 
 
coverage.  In light of the significant amount of money at stake 
and our preference "to afford litigants a day in court and a 
trial on the issues," we conclude that judicial consideration of 
the merits outweighs the finality of the default judgment.  
Split Rock, 253 Wis. 2d 238, ¶64.  Accordingly, this factor 
weighs in Zurich's favor. 
¶55 Fourth, we consider whether Zurich has a meritorious 
defense to Miller's claim for underinsured motorist coverage.  
See Sukala, 282 Wis. 2d 46, ¶11.  "The crux of the inquiry is 
whether, given another chance, the party seeking to vacate the 
judgment could reasonably expect a different result."  Allstate, 
305 Wis. 2d 400, ¶14.   
¶56 In its answer, Zurich affirmatively asserted that the 
commercial automobile insurance policy it issued to General 
Parts did not include underinsured motorist coverage because 
General Parts rejected its offer of underinsured motorist 
coverage.  In support of its assertion, Zurich filed the 
affidavit of Richard B. Guirlinger (Guirlinger), corporate 
controller, secretary and treasurer of General Parts, in support 
of its motion for relief from default judgment.  Guirlinger 
averred that "General Parts routinely and consistently rejected 
any and all . . . underinsured motorist insurance coverage."  He 
further averred, "[a]s to the Zurich policy[,] . . . I rejected 
all underinsured motorists coverage for the state of Wisconsin 
for that policy year."  Attached to Guirlinger's affidavit was a 
copy of the form, signed by General Parts, demonstrating that 
General Parts rejected Zurich's offer of underinsured motorist 
No. 
2008AP1494   
 
28 
 
coverage.  Moreover, before the amended complaint was filed, 
Miller's counsel was informed by General Parts and Lyons, on 
behalf 
of 
GAB 
Robins, 
that 
General 
Parts 
had 
rejected 
underinsured motorist coverage and provided counsel a copy of 
the rejection form.  Based on the foregoing, if Zurich is 
granted relief from the default judgment, it "could reasonably 
expect a different result."  Id., 305 Wis. 2d 400, ¶14.  Stated 
otherwise, if permitted to proceed, it is reasonably likely that 
Zurich will prevail on the merits of this case.  Accordingly, 
this factor weighs heavily in Zurich's favor. 
¶57 The fifth factor we consider is "whether there are 
intervening 
circumstances 
making 
it 
inequitable 
to 
grant 
relief."  Sukala, 282 Wis. 2d 46, ¶11 (quoting M.L.B., 122 
Wis. 2d at 553).  Miller fails to point to any intervening 
circumstances making it inequitable to grant relief.  Moreover, 
there has been no showing that Miller was prejudiced in any way 
by Zurich's delay in filing an answer to the amended complaint.  
Accordingly, this factor, too, weighs in Zurich's favor.   
¶58 The extraordinary circumstances test also directs 
courts to consider "any other factors bearing upon the equities 
of the case."  Id., ¶10.  We note that the record in this case 
presents 
many 
irregularities, 
procedural 
and 
otherwise, 
generated in part by plaintiff's counsel and circuit court 
personnel.  The procedural irregularities include the numerous 
notices and letters regarding court proceedings not provided by 
plaintiff's counsel to Ratzel when Ratzel was counsel of record, 
No. 
2008AP1494   
 
29 
 
and not provided to Zurich as well;11 and the court personnel 
error of failing to list Ratzel as Zurich's attorney of record.  
We also consider Fountain's failure to forward the amended 
summons and complaint to GAB Robins because of her mistaken 
belief that the amended complaint was a duplicate of a complaint 
she received a few days prior in which Miller named Zurich as a 
defendant 
in 
the 
same court.  We think the procedural 
irregularities demonstrate unfairness in the resolution of this 
dispute.  As such, this too weighs in favor of granting Zurich 
relief from the default judgment. 
¶59 Because of the five interest of justice factors 
weighing in favor of Zurich; the numerous errors, procedural and 
otherwise, that were generated in part by plaintiff's counsel 
and the circuit court personnel who were responsible for listing 
Ratzel as Zurich's attorney of record into the CCAP system; and 
our policy disfavoring default judgments, we conclude that 
Zurich has met its burden of proving that extraordinary 
circumstances exist justifying vacating the default judgment. 
¶60 Accordingly, we reverse and remand to the circuit 
court to vacate the default judgment.  It is implicit within our 
                                                 
11 For example, counsel for Miller sent a letter to the 
circuit court on January 10, 2006, requesting that it keep the 
case open for future proceedings.  Neither Zurich nor Ratzel 
were sent a copy of this letter.  See supra ¶13.  By this 
letter, Miller engaged in what could be construed as an ex parte 
communication with the circuit court.  By granting Zurich relief 
from the default judgment, we decline to give Miller's counsel 
the benefit of this communication that contributed to the entry 
of the default judgment. 
No. 
2008AP1494   
 
30 
 
order to remand that Zurich's previously filed answer be deemed 
timely.  It would be a "useless waste" to vacate the default 
judgment if on remand Zurich's answer would not be deemed timely 
because the circuit court would again be "compelled to enter the 
default judgment [only] to immediately entertain a motion to set 
it aside" on the grounds established in this opinion.  See 
Willing v. Porter, 266 Wis. 428, 430, 63 N.W.2d 729 (1954) 
(facing similar circular reasoning and concluding that a circuit 
court may properly refuse to enter a default judgment and permit 
a party to answer if it would be required to grant relief from 
the default judgment if entered); Johns, 201 Wis. 2d at 605–06 
(same). 
III.  CONCLUSION 
¶61 We 
conclude 
that 
the 
circuit 
court 
erroneously 
exercised its discretion in denying Zurich's motion for relief 
from a $2 million default judgment.  Because we so conclude, we 
need not decide whether the circuit court properly entered the 
default judgment against Zurich or whether the circuit court 
properly limited Miller's damages to $2 million.  Accordingly, 
we reverse the court of appeals decision affirming the circuit 
court's denial of Zurich's motion for relief from judgment and 
remand to the circuit court to vacate the default judgment. 
¶62 By the Court.—The decision of the court of appeals is 
reversed and is remanded to the circuit court for further 
proceedings. 
 
No.  2008AP1494.awb 
 
1 
 
¶63 ANN WALSH BRADLEY, J.   (concurring).  In my view, the 
majority is wrong about the law.  By converting the holistic 
inquiry about "extraordinary circumstances" into a formulaic 
five-part 
test, 
it 
transforms 
ordinary 
cases 
into 
"extraordinary" ones and undermines the finality of judgments. 
¶64 The majority is also wrong about the facts.  Its 
assertion that Ratzel was "Zurich's attorney of record" is much 
too simplistic.  It overlooks the potential for conflict of 
interest inherent in the dual representation advocated by the 
majority and ignores the facts of record which suggest that 
Zurich had a different attorney who was actually representing 
its underinsured motorist (UIM) defense.  Accordingly, the 
"procedural irregularities" identified by the majority did not 
contribute to the default judgment and are irrelevant to the 
determination of whether relief is warranted.   
¶65 When I examine the record, I conclude that the circuit 
court erroneously exercised its discretion——not because it 
failed to consider five interest of justice factors, but rather 
because it failed to balance the competing interests of finality 
and fairness.  Considering a range of relevant factors, I 
conclude that relief is warranted under the facts of this case.  
Accordingly, I respectfully concur. 
I 
¶66 Extraordinary circumstances are not presented by the 
ordinary case.  However, the analysis set forth by the majority 
transforms the ordinary case into the "extraordinary."  The 
majority 
converts 
the holistic inquiry for "extraordinary 
No.  2008AP1494.awb 
 
2 
 
circumstances" under Wis. Stat. § 806.07(1)(h) into a formulaic 
five-factor test.  As a result, it disregards this court's 
warning that subsection (h) "should be used sparingly" and 
should not be interpreted "so broadly as to erode the concept of 
finality."  State ex rel. M.L.B. v. D.G.H., 122 Wis. 2d 536, 
550, 552, 363 N.W.2d 419 (1985). 
¶67 Wisconsin Stat. § 806.07(1)(h) provides that a court 
can order relief from a judgment for "[a]ny other reasons 
justifying relief from the operation of the judgment."  The 
seminal case addressing the interpretation and application of 
subjection (h) is M.L.B., 122 Wis. 2d 536.  There, this court 
explained that section 806.07 "attempts to achieve a balance 
between the competing values of finality and fairness."  Id. at 
542.   
¶68 Unlike some of the other subsections in § 806.07(1), 
there is no time limit for bringing an action under subsection 
(h).  "[T]he ground for granting relief is 'justice' and the 
time for bringing the motion is 'reasonable.'"  Id. at 544-45.  
Therefore, 
if 
interpreted 
broadly, 
subsection 
(h) 
could 
significantly erode the finality of judgments.   
¶69 Recognizing this concern, the M.L.B. court cautioned: 
"We are mindful——and the circuit courts should be mindful——that 
finality is important and that subsection (h) should be used 
sparingly."  Id. at 550.  "The court should not interpret 
extraordinary circumstances so broadly as to erode the concept 
of finality, nor should it interpret extraordinary circumstances 
so narrowly that subsection (h) does not provide a means for 
No.  2008AP1494.awb 
 
3 
 
relief for truly deserving claimants."  Id. at 552.  Under 
subsection (h), a party is entitled to relief "only when the 
circumstances are such that the sanctity of the final judgment 
is outweighed by the incessant command of the court's conscience 
that justice be done in light of all the facts."  Id. at 550 
(emphasis omitted). 
¶70 To achieve the delicate balance between fairness and 
finality, the court set forth the "extraordinary circumstances" 
standard.  Id. at 549.  It explained that subsection (h) 
"invokes the sensibilities of the court," and "it is difficult 
to articulate the criteria on which the finding of extraordinary 
circumstances 
is 
based." 
 
Id. 
at 
552. 
 
In 
making 
a 
determination, "the court must consider a wide range of 
factors."  Id.  Because subsection (h) "invokes the pure equity 
power of the court," Schwochert v. Am. Fam. Mut. Ins. Co., 172 
Wis. 2d 628, 633-34, 494 N.W.2d 201 (1993), the factors that a 
circuit court should consider will depend on the facts and 
equities of each individual case.     
¶71 M.L.B. is clear.  Extraordinary circumstances are not 
presented by the ordinary case.   
¶72 However, the analysis set forth by the majority 
converts the holistic inquiry adopted by M.L.B. into a formulaic 
five-factor test: "We conclude that M.L.B. . . . unambiguously 
establish[es] that a circuit court is to consider the five 
interest of justice factors in determining whether extraordinary 
circumstances are present under Wis. Stat. § 806.07(1)(h) such 
No.  2008AP1494.awb 
 
4 
 
that relief from a judgment . . . is appropriate."  Majority 
op., ¶41.     
¶73 The five factors set forth by the majority are: (1) 
whether the judgment was the result of the conscientious, 
deliberate, and well–informed choice of the claimant; (2) 
whether the claimant received the effective assistance of 
counsel; (3) whether relief is sought from a judgment in which 
there has been no judicial consideration of the merits and the 
interests of deciding the particular case on the merits 
outweighs the finality of the judgment; (4) whether there is a 
meritorious defense to the claim; and (5) whether there are 
intervening circumstances making it inequitable to grant relief.  
Id., ¶36. 
¶74 The majority acknowledges that most default judgments 
would satisfy the test it sets forth: "We agree with Miller's 
assessment that many of the factors will weigh in favor of a 
party seeking relief from a default judgment entered for failure 
to timely answer."  Id., ¶46.   
¶75 In most cases where there is a default, the majority's 
first factor will weigh in favor of relief because the judgment 
will not have been "the result of the conscientious, deliberate 
and well–informed choice of the claimant."  Unlike in Brunswick 
Corporation, discussed by the majority,1 a defaulting party 
generally does not choose to concede anything——rather, it simply 
fails to answer.   
                                                 
1 Majority op., ¶50 (citing Allstate Ins. Co. v. Brunswick 
Corp., 2007 WI App 221, 305 Wis. 2d 400, 740 N.W.2d 888). 
No.  2008AP1494.awb 
 
5 
 
¶76 Likewise, the second factor, "whether the claimant 
received the effective assistance of counsel," will usually 
weigh in favor of relief from a default judgment.  An effective 
attorney would not likely default and give up a client's 
defenses to a claim. 
¶77 The third factor, "whether relief is sought from a 
judgment in which there has been no judicial consideration of 
the merits," will often be present.  By definition, there is no 
judicial consideration of the merits when there is default 
judgment.  Under the majority's analysis, it seems that the 
"preference to afford litigants a day in court and a trial on 
the issues" will often outweigh finality.  See majority op., 
¶54. 
¶78 The fourth factor, "whether there is a meritorious 
defense to the claim," will often be true.  If there was no 
meritorious defense, what reason would the defaulting party have 
for seeking relief from the judgment?   
¶79 It is unclear how the fifth factor, "whether there are 
intervening 
circumstances 
making 
it 
inequitable 
to 
grant 
relief," would be applied.  If intervening circumstances refer 
to circumstances that occur after the entry of judgment, this 
factor does not take into consideration the reasons for default. 
¶80 Missing from the majority's test is any consideration 
of the defaulting party's reasons for defaulting and whether 
those reasons should be excused.  Thus, the majority's test 
would 
appear 
to be equally applicable to a party that 
No.  2008AP1494.awb 
 
6 
 
intentionally 
failed 
to 
respond 
to 
a 
complaint 
or 
was 
inexcusably negligent.2 
¶81 Contrary to the majority, I conclude that most default 
judgments are ordinary, rather than extraordinary, and will not 
warrant relief.  By failing to actually require "extraordinary" 
circumstances, the majority ignores the M.L.B. court's caution 
that subsection (h) "should be used sparingly" and should not be 
interpreted "so broadly as to erode the concept of finality."  
122 Wis. 2d at 550, 552.    
¶82 The ultimate question for the circuit court should not 
be whether a party seeking to reopen a judgment meets a five-
factor test.  Rather, it should be a holistic inquiry into 
whether there are extraordinary circumstances "such that the 
sanctity of the final judgment is outweighed by the incessant 
command of the court's conscience that justice be done in light 
of all the facts."  Id. at 550.   
II 
¶83 In addition to misconstruing the law, the majority 
misconstrues the facts.  Its assertion that Ratzel was "Zurich's 
attorney of record" is much too simplistic.  It overlooks the 
potential for conflict of interest inherent in the dual 
                                                 
2 Although I agree with the majority that a defaulting party 
need not meet the legal standard for excusable neglect to be 
entitled to relief under subsection (h), I conclude that a 
defaulting party's reason for defaulting will likely weigh 
heavily in this inquiry.  See Johns v. County of Oneida, 201 
Wis. 2d 600, 609, 549 N.W.2d 269 (Ct. App. 1996) (noting that 
the defaulting party's nine-day delay in answering the complaint 
"appeared to be inadvertent rather than deliberate").  A party 
that sits back and knowingly defaults should not normally expect 
a court to conclude that the judgment is unfair.  
No.  2008AP1494.awb 
 
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representation advocated by the majority and ignores the facts 
of record which suggest that Zurich had a different attorney who 
was actually representing its UIM defense.   
¶84 At issue here are two different insurance claims: (1) 
the 
prosecution 
of 
a 
Wis. 
Stat. 
§ 102.29 
claim 
seeking 
reimbursement of benefits paid to Miller under a worker's 
compensation policy;3 and (2) the defense of a UIM claim made 
under an automobile liability policy.4  Even though both policies 
were issued by Zurich, they represent very different interests.  
The former's interest is aligned with the injured plaintiff,5 and 
the latter's interest is aligned with the tortfeasor.  Let me 
explain.   
                                                 
3 Wisconsin's worker's compensation statutes provide that an 
"employer or compensation insurer who shall have paid or is 
obligated to pay a lawful claim under [worker's compensation] 
shall have the same right to make [a] claim or maintain an 
action in tort against any other party for such injury or 
death."  Wis. Stat. § 102.29(1).   
4 Under most circumstances, underinsured motorist coverage 
may come into play when there is a tortfeasor from whom the 
plaintiff is legally entitled to recover compensatory damages 
and that tortfeasor's insurance is insufficient to cover the 
liability incurred.  If Zurich issued an underinsured motorists 
policy, it would not be obligated to compensate Miller for his 
injuries if Miller was not legally entitled to recover damages 
from Smith. 
5 An insurer seeking subrogation is often named as an 
"involuntary plaintiff."  "The statutory scheme under section 
803.03(2) contemplates inclusion of a subrogated party claiming 
medical expenses as a plaintiff."  2 Arnold P. Anderson, 
Wisconsin Insurance Law § 10.95 (5th ed. 2004).  However, it 
matters not whether the worker's compensation carrier is named 
as a plaintiff or an involuntary defendant——the interest it 
represents is the same. 
No.  2008AP1494.awb 
 
8 
 
¶85 The basis of the liability for both a Wis. Stat. 
§ 102.29 claim and a UIM claim is the same——the tortfeasor's 
conduct.  But the interests represented by those claims are 
opposite.   
¶86 When prosecuting a § 102.29 claim, the attorney wants 
to maximize the negligence of the tortfeasor.  The greater the 
negligence, the more money that will be available to reimburse 
the worker's compensation insurer under the § 102.29 formula.  
¶87 The attorney representing the UIM carrier, however, 
has an interest in minimizing the liability of the tortfeasor.  
The exposure of the UIM carrier is minimized whenever the 
negligence of the tortfeasor is minimized.  
¶88 Can an attorney in the same case both prosecute a 
§ 102.29 claim and defend a UIM claim?  The answer is probably 
not, because in the usual circumstance the attorney would be 
representing competing interests.  Such dual representation 
poses the potential for a conflict of interest.  
¶89 A central premise of the majority opinion is that 
relief is warranted because of "procedural irregularities" that 
occurred in the circuit court.  The majority asserts that 
Attorney Ratzel was Zurich's "attorney of record."  Majority 
op., ¶58.  It considers two irregularities, "generated in part 
by plaintiff's counsel and [] circuit court personnel" in 
determining that extraordinary circumstances justify vacating 
the default judgment: (1) documents and notices that were not 
provided to Ratzel during the course of the litigation; and (2) 
No.  2008AP1494.awb 
 
9 
 
the failure of circuit court personnel to list Ratzel "as 
Zurich's attorney of record" on CCAP.  Id., ¶¶58-59.  
¶90 The irregularities identified by the majority relate 
to lack of notice to Ratzel.  But Ratzel represented Zurich's 
worker's compensation interest.  He informed Miller by letter 
that he did not represent Zurich on any UIM policy it issued.  
Id., ¶7.  Not only that, but it is likely that Ratzel could not 
represent Zurich's UIM interest due to the potential conflict of 
interest discussed above.    
¶91 In fact, it appears that Zurich had a different 
attorney who was actually representing its UIM interest.  
Attorney 
Lyons 
corresponded 
with 
Miller's 
counsel 
about 
potential UIM coverage over a period of months.  See id., ¶8.   
¶92 In January of 2005 Lyons sent Miller's counsel a 
letter stating that his firm had been retained with regard to 
Miller's UIM claim, and he asked for Miller's medical reports.6  
In February, he provided Miller's counsel with the relevant 
policy and asserted "[I]t would be our position that there is no 
[UIM] coverage."  In March, Lyons sent a letter inquiring: "Now 
that you have had an opportunity to review the materials, I 
simply wanted to know your position on [UIM] coverage. . . . If 
you agree with us that there is no coverage, I would ask that 
                                                 
6 The letter stated in part: "With regards to [a] potential 
UIM claim, I am obtaining certified copies of the pertinent 
policy.  I have reviewed an uncertified copy, but I want to 
obtain a certified copy before any decisions are made.  Until I 
have that, I cannot tell you our position on whether there is 
any UIM coverage or not.  It would appear that there may not be, 
in this case, but I cannot make that analysis until I have a 
certified copy of the policy."  
No.  2008AP1494.awb 
 
10 
 
you please put that in writing; so that, we can document our 
file accordingly and conclude this matter."     
¶93 None of the irregularities identified by the majority 
relate to Lyons, who appeared to be representing Zurich's UIM 
interest.7  Because of the different interests represented by the 
two policies and the potential conflict of interest, I conclude 
that the "irregularities" identified by the majority are a red 
herring.   
¶94 I agree that, because Ratzel was representing Zurich's 
interest in the worker's compensation policy, he should have 
received the notices and letters, and his name should have been 
entered on CCAP.  However, I conclude that any failure to 
provide notice to Ratzel did not contribute to the default.  
Even if notice had been provided to Ratzel, it would have made 
no difference.  Ratzel affirmatively stated that he was not 
representing Zurich's interest in any UIM policy.  Due to the 
possible conflict of interest, Ratzel likely could not file an 
answer.  The real reason that Zurich defaulted is simple——its 
claims adjuster made a mistake. 
                                                 
7 Lyons received a copy of the amended complaint by letter.  
Majority op., ¶14.  However, he informed Miller that he could 
not accept service on behalf of Zurich: "I have not made an 
official appearance in this action.  I am not authorized to 
accept service on behalf of Zurich, and I cannot be served with 
all of the other discovery materials, since no official 
appearance has been made."  Lyons insisted that Miller serve 
Zurich "through normal channels . . . . You will need to serve 
them directly and we'll have to go from there."  Neither Lyons 
nor any other attorney answered the complaint on Zurich's 
behalf. 
No.  2008AP1494.awb 
 
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III 
¶95  Absent an erroneous exercise of discretion, an 
appellate court should not substitute its own judgment for that 
of the circuit court——even if it would have decided the issue 
differently.  See Kolupar v. Wilde Pontiac Cadillac, Inc., 2004 
WI 112, ¶22, 275 Wis. 2d 1, 683 N.W.2d 58.  A circuit court 
exercises its discretion when it examines the relevant facts, 
applies a proper standard of law, and using a demonstrated 
rational process, reaches a decision that a reasonable judge 
could reach.  Loy v. Bunderson, 107 Wis. 2d 400, 414-15, 320 
N.W.2d 175 (1982).   
¶96 Here, Zurich filed a motion for relief under Wis. 
Stat. § 806.07(1)(h).  When orally explaining its reasons for 
denying relief, the circuit court focused on its conclusion that 
service of the amended complaint was proper: 
I believe Zurich was served.  Unfortunately, there may 
have been some confusion when the amended summons and 
complaint were received by Zurich.  There may have 
been some confusion as well when court notices were 
sent to the address that we had, but the main service 
I believe was the service of the amended summons and I 
believe that the amended complaint had to go along 
with the amended summons and I think with that step 
being taken that there was notice to Zurich and that 
Zurich then had a responsibility to act in some 
fashion.   
. . . .  
[A]lthough there is a claim that this is not something 
that is done in the interest of justice, I'm aware 
that there is at least one other case where the 
coverage issue, although there was some coverage, was 
not an issue that the Court then was able to deal 
with. 
No.  2008AP1494.awb 
 
12 
 
And I believe under the circumstances that the 
unfortunate failure to respond to the amended summons 
and complaint brings us to where we are today.  I'm 
going to deny the motion for relief as has been 
requested by Zurich.   
¶97 When denying the motion for relief, the circuit court 
appeared to consider only one factor——that service was proper.  
It is not surprising that the circuit court's analysis focused 
on this one factor, given that the bulk of Zurich's brief was 
devoted to allegations about the propriety of service.   
¶98 Nevertheless, I now review the record to determine 
whether the circuit court examined the relevant facts and 
applied a proper standard of law when it denied the motion to 
vacate the default judgment under Wis. Stat. § 806.07(1)(h) in 
the interest of justice.  The record makes clear that the 
circuit court failed to balance the competing interests of 
finality and fairness.  I conclude that it erroneously exercised 
its discretion.   
¶99 In independently evaluating the competing interests of 
finality 
and 
fairness, 
I 
determine 
that 
extraordinary 
circumstances are present here.  Finality of judgment is an 
important consideration.  This judgment, however, had not been 
final for long when Zurich moved for relief.  In fact, Zurich 
rigorously contested coverage for months before the default 
judgment was entered.   
¶100 Although Zurich did not timely answer the amended 
complaint, 
its 
failure to timely answer was due to an 
inadvertent mistake of a claims adjuster.  The claims adjuster 
mistook Miller's amended complaint as a duplicate of a complaint 
No.  2008AP1494.awb 
 
13 
 
that she had already processed.  Although the mistake may not 
rise to the legal standard of "excusable neglect," it does 
appear to have been an honest mistake.   
¶101 Once the mistake was discovered, Zurich's attorney 
moved quickly to remedy the default, filing an answer to the 
amended complaint only 17 days after the motion for default 
judgment was filed.  This is not a case where the judgment was 
final long before the defaulting party sought to contest it.   
¶102 Further, this is not a case where Miller has relied on 
the default judgment, and nothing in the record suggests that 
Miller was prejudiced by Zurich's delay in filing a response.  
For months, Miller had known that Zurich contested UIM coverage.  
I conclude that finality would not be significantly undermined 
by granting Zurich's motion.    
¶103 The competing interest of finality is fairness.  Here, 
there appear to be good reasons that this case should be tried 
on the merits.  A default judgment was entered for a substantial 
sum of money——$2 million——on an underinsured motorists policy 
that may not even exist.  Fairness weighs in favor of trying 
this case on the merits.   
¶104 For the reasons set forth above, I conclude that 
extraordinary circumstances are present and that the interest in 
finality is overcome by the interest in fairness.  Therefore, I 
determine 
that 
relief 
under 
Wis. Stat. § 806.07(1)(h) 
is 
warranted.   
¶105 Ending the inquiry here leaves unanswered a procedural 
question that is bound to cause uncertainty on remand.  The 
No.  2008AP1494.awb 
 
14 
 
majority orders relief from judgment under subsection (h), and 
it remands to the circuit court to vacate the default judgment 
and decide this case on the merits.  These instructions appear 
to leave the parties in procedural limbo.   
¶106 In the circuit court, Zurich filed a motion to enlarge 
time to file an answer, which was denied.  As the circuit court 
correctly explained, "[I]n order for me to grant a motion to 
extend the time for filing of an answer, I have to conclude that 
the failure to do so was as a result of excusable neglect[.]"  
The court could not determine "that the mistake that would have 
been made in the processing of the documents is such that it can 
constitute 
excusable 
neglect[.]" 
 
Although 
the 
court 
acknowledged that the facts of the case were "unfortunate," it 
denied the motion.   
¶107 Because the motion to enlarge time was denied, 
Zurich's answer has never been accepted for filing by the court.  
Thus, the current status of the case is that no answer has been 
filed.  On remand, the circuit court will be required to address 
this status, and therein lies a problem that has analytically 
been left unaddressed by both the majority opinion and this 
concurrence.   
¶108 Wisconsin statutes provide that the circuit court may 
enlarge Zurich's time for filing an answer.  However, it can do 
so only after it finds that the failure to answer was the result 
of excusable neglect and if the interests of justice would be 
served by the enlargement of time:  
When an act is required to be done at or within a 
specified time, the court may order the period 
No.  2008AP1494.awb 
 
15 
 
enlarged but only on motion for cause shown and upon 
just terms. . . . If the motion is made after the 
expiration of the specified time, it shall not be 
granted unless the court finds that the failure to act 
was the result of excusable neglect.   
Wis. Stat. § 801.15(2)(a).   
¶109 In Hedtcke v. Sentry Insurance Co., 109 Wis. 2d 461, 
468, 326 N.W.2d 727 (1982), we explained that a circuit court 
may grant a motion to enlarge time if it "finds reasonable 
grounds for noncompliance with the statutory time period (which 
the statute and this court refer to as excusable neglect) and if 
the interests of justice would be served by the enlargement of 
time[.]"  Further, "when the circuit court determines that there 
is no excusable neglect, the motion [to enlarge time] must be 
denied."  Id.  We reiterated these conclusions recently in 
Estate of Otto v. Physicians Insurance Co. of Wisconsin, Inc., 
2008 WI 78, ¶114, 311 Wis. 2d 84, 751 N.W.2d 805. 
¶110 What, then, is the circuit court to do on remand?  It 
has determined that there is no excusable neglect.  Yet, under 
Wis. Stat. § 801.15(2)(a) and our case law, the court cannot 
enlarge the time for Zurich to file an answer unless it 
determines that the failure to act was due to excusable neglect.  
The circuit court will have to resolve this tension on remand.    
¶111 For the reasons set forth above, I conclude that the 
circuit court failed to exercise its discretion when it denied 
Zurich's motion for relief under Wis. Stat. § 806.07(1)(h).  I 
further conclude that extraordinary circumstances are present 
here.  On remand, the circuit court will have to address the 
next question: whether, given its prior conclusion that there 
No.  2008AP1494.awb 
 
16 
 
was no excusable neglect, it can grant Zurich's motion to 
enlarge time to file an answer. Accordingly, I respectfully 
concur. 
¶112 I am authorized to state that Chief Justice SHIRLEY S. 
ABRAHAMSON joins this concurrence. 
 
No.  2008AP1494.awb 
 
 
 
1