Court Opinion

ID: 9722019
Source: CourtListenerOpinion
Date Created: 2023-08-26 09:14:43.413485+00
Date Added: 2024-06-11T18:24:29.562087
License: Public Domain

CANE, P.J.
(concurring in part; dissenting in part). I would hold that the trial court correctly concluded that it had personal jurisdiction. Here, Farm Bureau issued an automobile liability policy to Marsh that covered travel into Wisconsin and other states. Typically, an automobile liability policy is sued upon where the accident takes place and, therefore, Farm Bureau should reasonably anticipate being haled into court in Wisconsin where the accident occurred. Farm Bureau contracted to not only indemnify Marsh, but also agreed to defend him. Obviously, this defense must occur where Marsh is sued. I would therefore *60conclude that the Wisconsin litigation requiring Farm Bureau's presence was not only foreseeable, but was purposefully contracted for by Farm Bureau. See Farmers Ins. Exch. v. Portage La Prairie Mut. Ins. Co., 907 F.2d 911, 913-14 (9th Cir. 1990). Therefore, the trial court properly concluded it has personal jurisdiction over Farm Bureau.
However, I would also conclude that although Wisconsin has personal jurisdiction over Farm Bureau, Minnesota law should have been applied, and not Wisconsin law. Farm Bureau maintains that the trial court erred by submitting the issues of bad faith and punitive damages, because Minnesota law should have been applied and Minnesota law does not provide for "extra-contract damages."1 Wisconsin recognizes two tests for resolving choice of law disputes. In Urhammer v. Olson, 39 Wis. 2d 447, 450, 159 N.W.2d 688, 689 (1968), the supreme court adopted the grouping-of-contacts approach for the resolution of conflicts questions in contract actions. This approach examines the contacts, both quantitatively and qualitatively, each state has with litigation.2 In Heath v. Zellmer, 35 Wis. 2d 578, *61596, 151 N.W.2d 664, 672 (1967), a tort action, the supreme court considered the following factors: Predictability of results; maintenance of interstate and international order; simplification of the judicial task; advancement of the forum's governmental interests; and application of the better rule of law.
Under Wisconsin law, the Marshes' action lies in tort, the tort of bad faith, Anderson v. Continental Ins. Co., 85 Wis. 2d 675, 271 N.W.2d 368 (1978); however, because their action involves breach of contract, both tests must be considered. See Schlussler v. American Family Mut. Ins. Co., 157 Wis. 2d 516, 526-27, 460 N.W.2d 756, 761 (Ct. App. 1990). In applying the grouping-of-contacts approach, I would conclude that more substantial contacts are with Minnesota, than with Wisconsin. The Marshes are domiciled in Minnesota. Farm Bureau is licensed to do business in Minnesota. The insurance contract was executed in Minnesota according to Minnesota law. The only significant contact with Wisconsin is that Farm Bureau allegedly failed to defend a lawsuit here and sought to protect its subrogation interest in the underlying small claims action. However, because the bad faith action is based on breach of contract, which was executed in *62Minnesota, and the insured is from Minnesota, the more significant contacts reside with Minnesota.3
I would conclude that application of the Heath test also favors applying Minnesota law. The Marshes contend that because Farm Bureau knew of the accident, and failed to defend in Wisconsin, Farm Bureau should have known that its tortious conduct would subject them to Wisconsin law. I disagree. The insurance contract was written in accordance with Minnesota law and was between a Minnesota resident and an insurance company that does business in Minnesota. Therefore, both parties should have expected Minnesota law to apply to disputes concerning the contract. Therefore, predictability would be fostered by applying the law under which the contract was negotiated and not the law where the act of failing to defend happened to have occurred.4
The next factor to consider is the maintenance of interstate and international order. This means that no state should impose its law in a situation when its parochial rules would unduly and without substantial reason impinge upon another state. Id. at 596, 151 N.W.2d at 672. Here, Wisconsin has very little interest *63in the outcome of the litigation. The dispute is between Minnesota residents and their insurance company and, therefore, Wisconsin law should not be applied.
Simplicity is a factor that I feel should not be weighed very heavily: As stated in Heath, a simple and easily applied rule of substantive or procedural law is to be preferred, but simplicity may well be outweighed by other considerations. Id. at 597, 151 N.W.2d at 672. The Marshes contend that it is easier for Wisconsin courts to apply their own law, however, Minnesota law is easier to apply because the court does not need to address punitive and bad faith issues.
The next factor to consider is whether application of the forum law will advance the governmental interest of the forum state. This is considered a major, although not a determinative factor. Id. at 598, 151 N.W.2d at 673. The Marshes contend that Wisconsin has a vital interest in protecting its litigants from the outrageous conduct exhibited by Farm Bureau. However, the litigant in this case is a Minnesota resident, and the insurance contract in question was executed in Minnesota. Again, Wisconsin has minimal interest in this action.
Finally, in considering the last factor, Wisconsin has the better rule of law. By allowing punitive damages and bad faith compensatory damages, Wisconsin law deters insurance companies from acting in bad faith and protects its residents from such outrageous behavior. However, because four out of the five factors favor applying Minnesota law, I would conclude that application of the Heath test also supports employment of Minnesota law.5
*64Under this previous analysis where I conclude Minnesota law should be applied, there remains the issue of Farm Bureau's breaching its contract to defend Marsh. Farm Bureau contends that the trial court erred by granting summary judgment in favor of the Marshes, finding that Farm Bureau had breached its contract by failing to defend. Farm Bureau maintains that it remained unaware of the counterclaim until eight months after the counterclaim had been filed, when Horace Mann, Maijorie Breuer's insurance company, informed them. At that time, Paul Marsh was already represented by Terrence Gherty. Furthermore, Farm Bureau suggests that it did not breach its duty to defend because Marsh never tendered the defense to them and because it would be redundant to defend Marsh after he was already being defended by Gherty.
The Marshes, however, maintain that Paul Marsh, before he had obtained counsel, called Bruce Flatmoe, Farm Bureau's agent, and informed him of the counterclaim. Furthermore, Paul Marsh contends that he tendered the defense in February 1988. The trial was held in February of 1990. As support for their proposition that Marsh tendered the defense, they reference Marsh's testimony at trial when he stated that he *65called Flatmoe immediately after learning of the counterclaim.
Obviously there are factual disputes; however, the Marshes correctly contend that they are irrelevant because it is undisputed that Farm Bureau did learn of the counterclaim prior to trial when Farm Bureau was contacted by Horace Mann. Therefore, I would conclude that there are no material facts in dispute and summary judgment was properly granted on this issue. See sec. 802.08(2), Stats.
Next, Farm Bureau contends that the trial court erred by allowing attorney's fees because Marsh was being represented on a contingent fee basis, and therefore incurred no fees or costs. The general rule is that "where an insurance contract is intended to relieve the insured of the financial burden of litigation, the insured will not be required to pay the litigation costs of forcing the insurer to assume that burden." Economy Fire & Cas. Co. v. Iverson, 445 N.W.2d 824, 827 (Minn. 1989). Here, the insured suffered no financial burden. However, it is unfair to relieve Farm Bureau of the costs merely because Marsh's attorney decided to defend the counterclaim as part of his representation of Marsh. Consequently, I would conclude Farm Bureau is responsible to pay the litigation costs for defending Marsh.
Finally, Farm Bureau contends that the Marshes should not have been awarded $20,235.70 in attorney's fees and costs because no evidence was presented as to what fees were incurred specifically in defending the counterclaim as opposed to pursuing the personal injury claim. However, a paralegal testified that most of the attorney's fees that were incurred, $16,826.25,6 *66related to the counterclaim, because both the counterclaim and the personal injury claim had to be pursued together. There was no evidence presented contesting this assertion, and there is credible evidence to support the jury's award.
Therefore, I would conclude Wisconsin had personal jurisdiction over Farm Bureau, but Minnesota law applies barring punitive damages under these facts and an action for bad faith. I would affirm the award of attorney's fees.

 Under Minnesota law, punitive damages are not recoverable in actions for breach of contract, except in exceptional cases where the breach of contract constitutes or is accompanied by an independent, willful tort. However, damages are recoverable for a breach of a contract that arise naturally from the breach itself and, therefore, the $20,235.70 in attorney's fees would be recoverable, even under Minnesota law. Pillsbury Co. v. National Union Fire Ins. Co., 425 N.W.2d 244, 248 (Minn. App. 1988).

 Urhammer involved a factual situation similar to the one presented here. The question involved whether State Farm Mutual Automobile Insurance Company was entitled to deny liability based on its family-exclusion clause. Such a clause is prohibited in Wisconsin, but not Minnesota. The court deter*61mined that Minnesota law applied. The accident occurred in Wisconsin. However, as the supreme court noted, the negotiations over the contract were undertaken in Minnesota; the domicile of the parties is Minnesota; the policy was entered into, issued and delivered in Minnesota; premiums were paid and claims filed in Minnesota and the vehicle involved was licensed and garaged in Minnesota. Therefore, the court reasoned that the more significant contacts were with Minnesota and not Wisconsin.

 The Marshes contend that Farm Bureau had significant contacts with Wisconsin because they knew that the accident occurred in Wisconsin and wrote the insurance contract after the event. However, the contract was executed in Minnesota and not Wisconsin, so therefore, I do not think that mere knowledge of the accident constituted a contact.

 In Heath, the court stated that predictability is essential in the law of contracts, but has little or no relevancy to an automobile accident or other tort that was never intended or planned. Because the Marshes' action involves a breach of contract, I would consider this factor, even though their action sounded in tort.

 In Schlussler, we considered a factual situation analogous to the one presented here. The Schlusslers filed an action alleging a breach of contract because American Family had *64wrongfully denied them medical coverage. American Family contended that Minnesota law should apply because the contract was written in accordance with Minnesota's No-Fault Act. We stated that Minnesota had only minimal contact with the litigation as the site where the accident occurred. We noted that the insurance contract was written in Wisconsin, medical treatments were received in Wisconsin, payments for the medical expenses were received in Wisconsin and the breach of the obligation to make payment occurred in Wisconsin. Therefore, Wisconsin law applied. Id. at 527, 460 N.W.2d at 761.

 Costs and disbursements were $3,409.45.