Court Opinion

ID: 4403053
Source: CourtListenerOpinion
Date Created: 2019-06-04 13:53:12.127736+00
Date Added: 2024-06-11T14:52:29.485855
License: Public Domain

2019 WI 62

                  SUPREME COURT          OF   WISCONSIN
CASE NO.:               2017AP1269
COMPLETE TITLE:         John Teske, Julie A. Teske, Katherine Teske and
                        Elle Teske,
                                   Plaintiffs-Appellants,
                        United HealthCare Insurance Company,
                                   Subrogated Party-Plaintiff,
                             v.
                        Wilson Mutual Insurance Company,
                                   Defendant-Respondent-Petitioner.

                           REVIEW OF DECISION OF THE COURT OF APPEALS
                           Reported at 382 Wis. 2d 832,917 N.W.2d 233
                                      (2018 – unpublished)

OPINION FILED:          June 4, 2019
SUBMITTED ON BRIEFS:
ORAL ARGUMENT:          March 18, 2019

SOURCE OF APPEAL:
   COURT:               Circuit
   COUNTY:              Fond du Lac
   JUDGE:               Peter L. Grimm

JUSTICES:
   CONCURRED:
   DISSENTED:
   NOT PARTICIPATING:   ABRAHAMSON, J. did not participate.

ATTORNEYS:

       For the defendant-respondent-petitioner, there were briefs
filed by Corrado Cirillo and Olsen, Kloet, Gunderson & Conway,
Sheboygan. There was an oral argument by Corrado Cirillo.

       For the plaintiffs-appellants, there was a brief filed by
Keith E. Trower and Warshafsky, Rotter, Tarnoff & Bloch, S.C.,
Milwaukee. There was an oral argument by Keith E. Trower.
                                                                       2019 WI 62
                                                               NOTICE
                                                 This opinion is subject to further
                                                 editing and modification.   The final
                                                 version will appear in the bound
                                                 volume of the official reports.
No.     2017AP1269
(L.C. No.   2016CV500)

STATE OF WISCONSIN                           :            IN SUPREME COURT

John Teske, Julie A. Teske, Katherine Teske and
Elle Teske,

            Plaintiffs-Appellants,

United HealthCare Insurance Company,
                                                                    FILED
            Subrogated Party-Plaintiff,                         JUN 4, 2019

      v.                                                          Sheila T. Reiff
                                                               Clerk of Supreme Court

Wilson Mutual Insurance Company,

            Defendant-Respondent-Petitioner.

      REVIEW of a decision of the Court of Appeals.                  Affirmed in
part, reversed in part.

      ¶1    ANN WALSH BRADLEY, J.       The petitioner, Wilson Mutual
Insurance      Company   (Wilson),   seeks   review      of    an    unpublished
decision of the court of appeals reversing the circuit court's
order   that    determined the   Teskes' claims         were    barred      by   the
                                                                            No.    2017AP1269

doctrine of claim preclusion.1                Wilson contends that the circuit
court correctly dismissed the Teskes' claims because the claims
could     have     been   brought   in    a       prior    action   between        the   same
parties.
      ¶2      Specifically,       Wilson      asserts        that     claim       preclusion
applies to bar all of the plaintiffs' claims because all three
elements of claim preclusion are established.                         It contends that
the parties to the first and second actions were the same, or
were in privity.            Wilson argues next that identity of causes of
action is present because the claims in this lawsuit and the
previous lawsuit arose from the same common nucleus of operative
facts.     Finally, it advances that there was a final judgment on

the merits in the first action.
      ¶3      We      conclude   that    claim       preclusion       bars    the    claims
brought     by     Julie,    Katherine,       and    Elle     Teske    in     this    second
action.       Accordingly, we reverse that part of the decision of
the   court      of    appeals   that    allowed          their   claims      to    proceed.
However, we are evenly divided as to whether claim preclusion

bars the claims brought by John Teske.                       As a result, we affirm

      1Teske v. Wilson Mut. Ins. Co., No. 2017AP1269, unpublished
slip op. (Wis. Ct. App. May 9, 2018) (reversing order of the
circuit court for Fond du Lac County, Peter L. Grimm, Judge).

                                              2
                                                                       No.     2017AP1269

the court of appeals' decision that allowed John's claims to
proceed.2
                                              I
       ¶4         This case arises from a car accident in Fond du Lac
County       on    November    24,    2013.       The   underlying     facts       of    the
accident are undisputed.
       ¶5         Emily Teske was driving a vehicle in which her mother,
Julie, and two sisters, Katherine and Elle, were passengers.
John       Teske,    Julie's    husband     and   Emily,    Katherine        and   Elle's
father, was not in the car.                 Julie, Emily, Katherine, and Elle
were all seriously injured after their vehicle was rear-ended by
a car driven by Sabrina Srock.                     The force of the collision

propelled         the     Teskes'    car   into   the   oncoming   lane,      where      it
struck a vehicle driven by Patrice Rog, who was also injured.
       ¶6         Srock    carried    an   automobile      insurance    policy          with
State Farm that provided a policy limit of $100,000 per person
and $300,000 per accident.                  The Teskes carried a policy with
Wilson, which as relevant here contained underinsured motorist

(UIM) coverage with a policy limit of $500,000 per person, per
accident.           Importantly, the Wilson policy also incorporated a
"reducing clause" which "permits a setoff from the insured's UIM

       2
       See Wingra Redi-Mix, Inc. v. Burial Sites Preservation
Bd., 2018 WI 54, ¶1, 381 Wis. 2d 601, 912 N.W.2d 392 ("The
decision of the court of appeals is affirmed by an equally
divided court."); Gruhl Sash & Door Co. v. Chicago, M. & St. P.
Ry. Co., 173 Wis. 215, 180 N.W. 845 (1921) (explaining that when
the court is equally divided, the order appealed from is
affirmed).

                                              3
                                                                  No.      2017AP1269

coverage [in] the amount paid to the insured by the underinsured
tortfeasor."3
      ¶7     The accident resulted in two separate lawsuits.                       In
the first action, Julie Teske brought a negligence claim against
Srock and her insurer, State Farm, in Milwaukee County circuit
court.4      Katherine    and   Elle   were     also   named   as     plaintiffs,
although as minors they were represented by a guardian ad litem.
      ¶8     Pursuant to a minor settlement agreement,5 the parties
settled the lawsuit and agreed how the money from the various
insurers     would   be   split.   State        Farm   tendered     its    $300,000
policy limit, but the amount was insufficient to cover the full
medical expenses incurred by Rog and the Teskes.                  The amount was

ultimately split between the Teskes and Rog, with the Teskes
receiving $255,000 and Rog receiving $45,000.
      ¶9     Applying the policy's reducing clause, Wilson agreed
to   pay   the   Teskes   $245,000.        It   arrived   at   this       amount   by

      3Dowhower ex rel. Rosenberg v. West Bend Mut. Ins. Co.,
2000 WI 73, ¶1, 236 Wis. 2d 113, 613 N.W.2d 557.
      4   The Honorable David Hansher presided.
      5   Pursuant to Wis. Stat. § 807.10(1) (2013-14),

      A compromise or settlement of an action or proceeding
      to which a minor or individual adjudicated incompetent
      is a party may be made by the guardian, if the
      guardian is represented by an attorney, or the
      guardian ad litem with the approval of the court in
      which such action or proceeding is pending.

All subsequent references to the Wisconsin Statutes are to the
2013-14 version unless otherwise indicated.

                                       4
                                                                    No.   2017AP1269

beginning with its $500,000 UIM policy limit and subtracting the
$255,000 the Teskes received from State Farm.
     ¶10    Each member of the Teske family received proceeds from
the insurance settlement as set forth in the minor settlement
agreement.      Specifically,        Julie      received   $264,000,      Katherine
received $40,000, Elle and Emily received $35,000 each, and John
received $20,000.
     ¶11    Also incorporated into the minor settlement agreement
was a "Pierringer Release."6          Pursuant to the Pierringer Release,

the Teskes released all of their claims against Srock and State
Farm.    The Teskes partially released Wilson to the extent of the
$245,000 it paid.        However, they explicitly "reserved the right

to pursue further claims for UIM benefits against [Wilson] and
[Wilson] has not waived any defenses to such future claims."
The minor settlement agreement was signed by each member of the
Teske    family,7   as   well   as    a       representative   of    Wilson,    and
approved by the circuit court.

     6 "A Pierringer release operates as a satisfaction of that
portion of the plaintiff's cause of action for which the
settling joint tortfeasor is responsible, while at the same time
reserving the balance of the plaintiff's cause of action against
a nonsettling joint tortfeasor."   Imark Indus., Inc. v. Arthur
Young & Co., 148 Wis. 2d 605, 621, 436 N.W.2d 311 (1989); see
Pierringer v. Hoger, 21 Wis. 2d 182, 184-85, 124 N.W.2d 106
(1963). It provides that the plaintiff "will assume or satisfy
that portion of the liability that is determined to be the
responsibility of the settling joint tortfeasor." Imark Indus.,
148 Wis. 2d at 621.
     7 Although they were not named parties in the lawsuit, Emily
and John each signed the minor settlement agreement, under which
each received the stated proceeds. See supra, ¶10.

                                          5
                                                                     No.     2017AP1269

       ¶12    After        releasing     Srock     and    State      Farm,     Julie,
Katherine, and Elle amended their complaint and added Wilson as
a defendant.          At issue in this amended declaratory action was
whether the reducing clause in the Wilson policy was properly
applied.          Venue was transferred to Sheboygan County, and the
Sheboygan         County    circuit    court8    determined   that    the    reducing
clause       was     unambiguous,       valid,     and    applicable.          Julie,
Katherine, and Elle appealed and the court of appeals affirmed.
Teske ex rel. Harding v. Wilson Mut. Ins. Co. (Teske I), No.

2015AP208, unpublished slip op. (Wis. Ct. App. Aug. 19, 2015).
The same three Teskes petitioned for review, which this court
denied, thus ending the first action.

       ¶13    Following the resolution of the first action, John,
Julie, Katherine, and Elle brought this second lawsuit.                           They
alleged that Emily, as the driver at the time of the accident,
was negligent in the operation of the Teske vehicle.                         However,
they       sued    Wilson    directly     as    Emily's   insurer     pursuant      to
Wisconsin's direct action statute.9

       8   The Honorable Angela W. Sutkiewicz presided.
       9
       Wisconsin Stat. § 632.24, the "direct action" statute,
"provides that any liability policy covering negligence makes
the insurance company liable to the person entitled to recover
against the insured up to policy limits.      Under the direct
action statute, the complaining party may allege the insured's
conduct, and the insurer's liability therefor, directly against
the insurer."   Estate of Otto v. Physicians Ins. Co. of Wis.,
Inc., 2008 WI 78, ¶32, 311 Wis. 2d 84, 751 N.W.2d 805.      The
statute provides:

       Any bond or policy of insurance covering liability to
       others for negligence makes the insurer liable, up to
                                                      (continued)
                                           6
                                                                     No.    2017AP1269

      ¶14   Moving for summary judgment, Wilson argued that the
Teskes' negligence action was barred by the doctrine of claim
preclusion.      Focusing        on       the   first    two   elements     of   claim
preclusion,    identity     of     parties         and   identity    of    causes   of
action, it asserted that there was identity between the parties
in both lawsuits.         It based this argument on the observation
that Wilson, Julie, Katherine and Elle were all named plaintiffs
in the first action.         Wilson also observed that although John
was   not    formally    named        a    party    in   the     first    action,   he
participated    and     received      proceeds      from   the    minor    settlement
agreement.
      ¶15   Wilson also contended that there was identity between

the causes of action in both lawsuits.                   Specifically, it argued
that the actions arose from a single event——the November 24,
2013 accident.10

      the amounts stated in the bond or policy, to the
      persons entitled to recover against the insured for
      the death of any person or for injury to persons or
      property, irrespective of whether the liability is
      presently established or is contingent and to become
      fixed or certain by final judgment against the
      insured.

§ 632.24.
      10
       Wilson did not make a specific argument regarding the
third element of claim preclusion, a final judgment on the
merits, other than to assert that "[t]here is no dispute that
the Sheboygan County Circuit Court entered a final judgment on
the merits dismissing the Teskes' prior lawsuit."

                                            7
                                                                            No.       2017AP1269

       ¶16     The circuit court agreed with Wilson and granted the
motion for summary judgment.                   It determined that "there is no
dispute as to the technical identity between the parties given
the captions and pleadings of the suits and the involvement of
the    parties       in   the    litigation        and    the   minor    settlement         and
executing documents and such."
       ¶17     Additionally, the circuit court concluded that there
was an identity of the causes of action in the first and second
lawsuits,       explaining:            "The    methodology        or    the    phraseology
refers    to     a    concept     of    a     transaction       which    has      a    natural
grouping of a common nucleus of operative facts, and here the
facts are all consistent about the horrific accident on November

24th, 2013, on Highway 23 near Mount Calvary."                                 Finally, it
determined that a final judgment on the merits had been reached.
Accordingly, the circuit court concluded that claim preclusion
barred the second action.
       ¶18     The    Teskes      appealed,         and     the     court      of      appeals
reversed.        Teske      v.    Wilson       Mut.      Ins.   Co.    (Teske       II),    No.

2017AP1269, unpublished slip op. (Wis. Ct. App. May 9, 2018).
Contrary to the circuit court, the court of appeals determined
that    claim    preclusion        did      not    bar    the     second      action.        It
reasoned that "[t]he current tort action involves litigation of
different facts and legal theories, specifically the facts of
the accident versus the interpretation of whether the reducing
clause in Wilson's policy applied."                      Id., ¶9.      As opposed to the
first action, which "was a contract action . . . requir[ing] the
court to interpret Wilson's UIM policy provisions[,]" the second
                                               8
                                                                         No.     2017AP1269

action "will examine Emily's alleged negligence and, if any,
whether her negligence was a cause of the Teskes' injuries."
Id.

       ¶19     Accordingly,        the    court      of    appeals      concluded     that
"[t]he two actions involve neither a common 'nucleus of facts'
nor legal question."           Id.        Thus in the court of appeals' view,
"there    is     no   requirement         in   law    or   equity      requiring     these
distinctly separate claims to be litigated together."                          Id.
                                               II
       ¶20     We are asked to review the court of appeals' decision
concluding that claim preclusion does not bar the Teskes' second
action.        Whether claim preclusion applies under a given factual

scenario is a question of law we review independently of the
determinations         rendered      by    the      circuit    court     and   court    of
appeals.        Federal Nat'l Mortg. Ass'n v. Thompson, 2018 WI 57,
¶28, 381 Wis. 2d 609, 912 N.W.2d 364.
       ¶21     This question arises in the context of a motion for
summary      judgment.        We     similarly        review    a    summary     judgment
determination         independently,       without deference            to the    circuit
court or court of appeals.                Shugarts v. Mohr, 2018 WI 27, ¶17,
380 Wis. 2d 512,        909 N.W.2d 402.              Summary     judgment      is
appropriate where there is no genuine issue as to any material
fact and the moving party is entitled to judgment as a matter of
law.     Id.

                                               9
                                                                                  No.        2017AP1269

                                                   III
       ¶22    To determine whether claim preclusion bars this second
action,      we      address       each       of     the      three       elements          of    claim
preclusion with respect to the facts of this case.
       ¶23    "The     doctrine         of     claim       preclusion          provides          that   a
final judgment on the merits in one action bars parties from
relitigating any claim                  that    arises        out    of    the    same relevant
facts,      transactions          or    occurrences."               Kruckenberg         v.       Harvey,

2005 WI 43,     ¶19,        279 Wis. 2d 520,          694 N.W.2d 879         (citations
omitted).         Pursuant to claim preclusion, "a final judgment is
conclusive in all subsequent actions between the same parties as
to all matters which were litigated or which might have been

litigated       in    the    former          proceedings."            Lindas      v.    Cady,       183
Wis. 2d 547, 558, 515 N.W.2d 458 (1994) (quoting DePratt v. West
Bend     Mut.     Ins.      Co.,       113 Wis. 2d 306,           310,       334 N.W.2d 883
(1983)).
       ¶24    Claim preclusion is "designed to draw a line between
the    meritorious          claim       on    the       one   hand       and     the    vexatious,
repetitious and needless claim on the other hand."                                          N. States
Power Co. v. Bugher, 189 Wis. 2d 541, 550, 525 N.W.2d 723 (1995)
(quoting      Purter        v.    Heckler,         771 F.2d 682,       689-90       (3d    Cir.
1985)).      The doctrine "provides an effective and useful means to
establish and fix the rights of individuals, to relieve parties
of    the    cost    and     vexation         of    multiple        lawsuits,          to    conserve
judicial resources, to prevent inconsistent decisions, and to
encourage         reliance         on        adjudication."                Kruckenberg,             279
Wis. 2d 520,         ¶20    (citations          omitted).           It    further       recognizes
                                                   10
                                                                               No.        2017AP1269

that "endless litigation leads to chaos; that certainty in legal
relations must be maintained; that after a party has had his day
in    court,    justice,          expediency,       and     the    preservation            of     the
public tranquility requires that the matter be at an end."                                        Id.

(citations omitted).
       ¶25     Three     elements         are       required        to        establish           the
application      of     claim      preclusion       to     bar    an     action:           (1)     an
identity between the parties or their privies in the prior and
present lawsuits; (2) an identity of the causes of action in the
two lawsuits; and (3) a final judgment on the merits in a court
of competent jurisdiction.                N. States Power Co., 189 Wis. 2d at
551.    We address each in turn.

                                                A
       ¶26     We begin our claim preclusion analysis by addressing
the first element, identity between the parties or their privies
in the prior and present lawsuits.                    Id.
       ¶27     This    court       has   previously       stated       that     there        is    an
identity of parties when the parties are "for the most part,
identical."           Wickenhauser       v.     Lehtinen, 2007 WI 82,      ¶28, 302
Wis. 2d 41,       734 N.W.2d 855        (citing       Sopha        v.    Owens-Corning
Fiberglas       Corp.,       230 Wis. 2d 212,          ¶48     n.28,       601 N.W.2d 627
(1999)).       For example, case law provides that this element is
met when the two actions involve a closely-held corporation in
one    case      and        its    principal        shareholder           in        the     other.
Wickenhauser,         302 Wis. 2d 41,        ¶29      n.12     (citing       Manu-Tronics,
Inc. v. Effective Mgnt. Sys., Inc., 163 Wis. 2d 304, 315, 471
N.W.2d 263 (Ct. App. 1991)).                    Similarly, an owner of property
                                              11
                                                                               No.    2017AP1269

and a successor in interest to that property are in privity for
purposes      of    claim   preclusion.                Kruckenberg,      279 Wis. 2d 520,

¶23.
       ¶28    With regard to the claims made by Julie, Katherine,
and Elle, we need not reach a privity analysis because identity
of parties is distinctly present.                         Julie, Katherine, and Elle
were named parties in both the first action and the present
action.        Likewise, Wilson was a named party in both actions.
Thus, because Julie, Katherine, Elle, and Wilson were all named
parties      in    the two actions,               identity    of   parties exists              with
respect to those named parties.
       ¶29    However,      we    are       equally      divided    as    to    whether        the

identity of parties element is met with regard to John.                                      Thus,
we affirm the court of appeals' decision that allowed John's
claims to proceed.
                                                  B
       ¶30    We turn next to address the second element of claim
preclusion,         identity      of        the    causes     of   action       in     the      two
lawsuits.         See N. States Power Co., 189 Wis. 2d at 551.                            Because
we are equally divided as to whether the first element of claim
preclusion is met with regard to John, we need only address the
second       element    with     respect          to    the   claims     made        by    Julie,
Katherine, and Elle.
       ¶31    For      purposes        of     determining      whether         there      is    an
identity      of causes of         action          in two lawsuits,            Wisconsin        has

                                                  12
                                                               No.    2017AP1269

adopted     the    "transactional      approach"     set   forth       in     the
Restatement (Second) of Judgments § 24 (1982).11           Menard, Inc. v.

Liteway Lighting Prods., 2005 WI 98, ¶30, 282 Wis. 2d 582, 698
N.W.2d 738.          The    transactional      approach    "reflects          the
expectation that parties who are given the capacity to present
their entire controversies shall in fact do so."                Kruckenberg,
279 Wis. 2d 520, ¶27 (internal quotation and citation omitted).
Pursuant    to    this   analysis,   "all   claims   arising    out    of     one
transaction or factual situation are treated as being part of a
single cause of action and they are required to be litigated
together."       A.B.C.G. Enters., Inc. v. First Bank Se., N.A., 184
Wis. 2d 465,      480-81,   515 N.W.2d 904   (1994)   (quoting      Parks    v.

City of Madison, 171 Wis. 2d 730, 735, 492 N.W.2d 365 (Ct. App.
1992)).

     11   Restatement (Second) of Judgments § 24 (1982) provides:

     (1) When a valid and final judgment rendered in an
     action extinguishes the plaintiff's claim pursuant to
     the rules of merger or bar (see §§ 18, 19), the claim
     extinguished includes all rights of the plaintiff to
     remedies against the defendant with respect to all or
     any part of the transaction, or series of connected
     transactions, out of which the action arose.

     (2) What factual grouping constitutes a "transaction",
     and what groupings constitute a "series", are to be
     determined   pragmatically,  giving  weight  to   such
     considerations as whether the facts are related in
     time, space, origin, or motivation, whether they form
     a convenient trial unit, and whether their treatment
     as a unit conforms to the parties' expectations or
     business understanding or usage.

                                      13
                                                                               No.       2017AP1269

      ¶32     The   concept        of    a    "transaction"           connotes       a    natural
grouping or common nucleus of operative facts.                                 Menard, Inc.,

282 Wis. 2d 582, ¶30 (citations omitted).                             "In determining if
the claims of an action arise from a single transaction, we may
consider whether the facts are related in time, space, origin,
or motivation."        Id.
      ¶33     Relying on this second element of the claim preclusion
analysis, the court of appeals determined that claim preclusion
does not bar the Teskes' second lawsuit.                               It concluded that
despite the fact that the claims in both lawsuits arose from the
November 24, 2013 car accident, the requirement of identity of
causes of action was not fulfilled.

      ¶34     The   court     of    appeals'         reasoned      that     "[t]he        current
tort action involves litigation of different facts and legal
theories,     specifically         the       facts    of    the    accident          versus    the
interpretation of whether the reducing clause in Wilson's policy
applied."      Teske II, No. 2017AP1269, unpublished slip op., ¶9.
"The current action will examine Emily's alleged negligence and,
if   any,   whether     her    negligence            was    a    cause    of    the       Teskes'
injuries."      Id.    In contrast, "[t]he prior action was a contract
action,     which     required      the       court    to       interpret      Wilson's        UIM
policy provisions."          Id.
      ¶35     We disagree with the court of appeals.                             Contrary to
the court of appeals' conclusion, we determine that the causes
of   action    in     both   lawsuits         arise    from       a    common        nucleus    of
operative facts——namely, the November 24, 2013 car accident.

                                               14
                                                                     No.     2017AP1269

      ¶36       The court of appeals' error originates in its approach
of examining the legal theories presented in the two actions
rather than the underlying facts.                 Following a transactional
analysis, "it is irrelevant that 'the legal theories, remedies
sought, and evidence used may be different between the first and
second actions.'"           Menard, Inc., 282 Wis. 2d 582, ¶32 (quoting

Kruckenberg, 279 Wis. 2d 520, ¶26).               Rather, "[t]he goal in the
transactional approach is to see a claim in factual terms and to
make a claim coterminous with the transaction, regardless of the
claimant's substantive theories or forms of relief, regardless
of the primary rights invaded, and regardless of the evidence
needed to support the theories or rights."                      Kruckenberg, 279
Wis. 2d 520, ¶26.
      ¶37       With our lens properly focused on the facts instead of
the legal theories, it is apparent that the claims made in both
the   first      and   second      actions    arise    from    the   same     factual
circumstances surrounding the November 24, 2013 car accident.
Although the court of appeals viewed the UIM issue in the first
action     as    separate   and    distinct    from    the    tort   claim    in   the
second action, without an underlying tort there can be no UIM
claim.
      ¶38       This court's decision in State Farm Mut. Auto. Ins.
Co.   v.    Gillette,       2002 WI 31,    ¶31,    251 Wis. 2d 561,        641
N.W.2d 662, sheds light on the connection between a UIM claim
based on contract and the tort claim that necessarily underlies
a UIM claim.           It explained:         "A claim against the insurance
company for underinsured motorist coverage is 'an action on the
                                         15
                                                                                   No.        2017AP1269

policy and sounds in contract,' although an underlying tortious
injury is also involved."               Id., ¶25 (citing Sahloff v. W. Cas. &

Sur. Co., 45 Wis. 2d 60, 70, 171 Wis. 2d 914 (1969)).
       ¶39    As the Gillette court highlighted, "[w]hen an insured
sues an insurance company for underinsured motorist coverage,
contract law and tort law converge.                             Contract law applies to
interpret      the       insurance      policy,       but        an    insured's          right        to
underinsured motorist benefits hinges on the existence of a tort
cause of action against the underinsured motorist."                                 Id., ¶31.
       ¶40    Although        the    tort     cause       of    action     here          is    against
Emily    Teske,        and    the    tort   underlying           the    UIM    case           was    that
committed by Srock, the two alleged torts arose as part of the

same car accident, i.e. the same common nucleus of operative
facts.       Thus, the negligence claim against Emily could have been
litigated in the first action.                        See Menard, 282 Wis. 2d 582,
¶55.     We therefore conclude that the second element of claim
preclusion, identity of causes of action, is fulfilled.
                                               C
       ¶41    Finally,         we    address        the        third    element           of        claim
preclusion,        a    final       judgment    on     the       merits       in    a     court        of
competent jurisdiction.               See N. States Power Co., 189 Wis. 2d at
551.
       ¶42    The       parties      exhaustively              litigated       the        issue        of
whether      the       reducing      clause    in     the        Wilson       policy          applies.
Initially,         the       Sheboygan        County           circuit        court           made      a
determination          that    the    clause       applies.            This    conclusion             was

                                               16
                                                                            No.     2017AP1269

affirmed by the court of appeals.                  After Julie, Katherine, and
Elle petitioned for review, this court denied the petition.
       ¶43    A final judgment was accordingly reached on the issue
of whether the reducing clause in the Wilson policy applies.
Such   a     final    judgment       has   preclusive        effect    on    all     matters
"which were litigated or which might have been litigated in the
former proceedings."                Kruckenberg, 279 Wis. 2d 520, ¶19.                      We

thus   conclude that the             third   element of claim            preclusion         is
fulfilled.
       ¶44    In sum, all three elements of claim preclusion are met
with   regard        to    Julie,    Katherine,        and    Elle's    claims       against
Wilson.       We therefore conclude that claim preclusion bars the

claims      brought       by Julie,    Katherine,       and Elle in this              second
action.       Accordingly, we reverse that part of the decision of
the court of appeals that allowed their claims to proceed.
       ¶45    However, we are evenly divided as to whether claim
preclusion bars the claims brought by John.                            As a result, we
affirm the court of appeals' decision that allowed John's claims
to proceed.
       By    the   Court.—The        decision     of    the    court    of        appeals   is
affirmed in part and reversed in part.
       ¶46    SHIRLEY         S.      ABRAHAMSON,             J.,      withdrew          from
participation.

                                             17
    No.   2017AP1269

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