Opinion ID: 2214246
Heading Depth: 1
Heading Rank: 1

Heading: facts

Text: ¶ 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 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 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 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 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 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 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. ¶ 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 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, 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. ¶ 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. ¶ 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, 2009 WL 2308803 (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.