Burris et al v. Versa Products, Inc. et al
Filing
112
MEMORANDUM OPINION AND ORDER granting Gulf Underwriters Insurance Company's 103 Motion to Intervene (Written Opinion). Signed by Judge John R. Tunheim on September 4, 2012. (DML)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
LOWELL P. BURRIS and
JOYCE P. BURRIS,
Civil Nos. 07-3938 (JRT/JJK)
Plaintiffs,
MEMORANDUM OPINION
AND ORDER
v.
VERSA PRODUCTS, INC.,
G AND L PRODUCTS, INC.,
Defendants.
Thomas F. Handorff, HANDORFF LAW OFFICES, P.C., 1660 South
Highway 100, Suite 500, St. Louis Park, MN 55416, for plaintiffs.
Matthew D. Sloneker and Richard A. Lind, LIND JENSEN SULLIVAN
& PETERSON, PA, 901 Marquette Ave., South, Suite 1300, Minneapolis,
MN 55402, for defendants.
Nicholas J. O’Connell and Thomas A. Gilligan, Jr., MURNANE
BRANDT, 30 East Seventh Street, Suite 3200, St. Paul, MN 55101, for
third-party intervenor Gulf Underwriters Insurance Company.
Following the Eighth Circuit’s dismissal of Gulf Underwriters Insurance
Company’s (“Gulf’s”) declaratory judgment action (Civ. No. 08-cv-1292), non-party
Gulf now moves to intervene in this case, bifurcate the proceedings into coverage and
liability phases, and stay the liability phase pending resolution of the coverage dispute.
(Docket No. 103.) Plaintiffs Lowell P. Burris and Joyce P. Burris (“the Burrises”)
partially oppose the motion. (Docket No. 107.) Because bifurcation and stay is the
preferred procedure under applicable Wisconsin law, because trying the coverage and
liability issues simultaneously would be confusing for the jury, and because the Court
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finds that forcing Gulf to defend the liability case before resolving its coverage
obligations would be both inefficient and unfairly punitive under the circumstances, the
Court will grant Gulf’s motion. Any party wishing to move for summary judgment on
the coverage issue will be ordered to do so within thirty days of this Order.
BACKGROUND
This case is before the Court following the Eighth Circuit’s dismissal of Gulf’s
related declaratory judgment action, which it brought to determine its duty to defend its
insured, defendants Versa Products, Inc. and G & L Products, Inc. (collectively “Versa”)
against the Burrises’ claims that they negligently manufactured a ladder from which
Lowell Burris fell and sustained injuries. (Compl., Sept. 11, 2007, Docket No. 1.) The
Eighth Circuit reversed this Court’s grant of summary judgment for Gulf, and ordered the
products liability action to proceed. (Civ. No. 08-1292, Op. at 10, Mar. 27, 2012, Docket
No. 72.)
The Eighth Circuit found that dismissal was appropriate because Gulf had failed to
disclose to the courts the existence of highly relevant Wisconsin statutes and judicial
opinions on the issue of whether Gulf had another, more appropriate remedy – namely,
participation in this underlying liability action. The appellate court observed that, under
Wisconsin law, “the proper procedure for an insurance company to follow when coverage
is disputed is to request a bifurcated trial on the issues of coverage and liability[.]” (Id. at
9 (quoting Newhouse v. Citizens Sec. Mut. Ins. Co., 501 N.W.2d 1, 6 (Wis. 1993)). The
court also observed, however, that when the insurer was not joined in the underlying
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action – as in this case – coverage may be determined in a separate declaratory judgment
action. Id.; see also Fire Ins. Exch. v. Basten, 549 N.W.2d 690, 696 (Wis. 1996).
Disapproving of Gulf’s “deceptive misstatements and non-disclosures,” the Eighth
Circuit “exercise[ed its] discretion to deny Gulf a declaratory judgment resolving other
coverage issues that might have been suitable for declaratory relief in other
circumstances.” (Id. at 9.)1
Gulf now moves to intervene, bifurcate the proceedings into liability and coverage
phases, and stay the liability proceeding pending resolution of the coverage issue. The
Burrises object, arguing that both the Eighth Circuit opinion and Wisconsin law prohibit
this result, that Gulf should be estopped from denying coverage, and that Gulf can only
present any coverage defenses after trial of the products liability case.
1
Because the parties read the Eighth Circuit’s direction on this issue very differently, the
relevant potion of the text is reproduced below:
Given the number of deceptive misstatements and non-disclosures in Gulf’s
presentation of the SIR issue to the district and to this court, and the existence of a
‘preferred procedure to determine insurance coverage’ under Wisconsin law, we
conclude that we should exercise our discretion to deny Gulf a declaratory
judgment resolving other coverage issues that might have been suitable for
declaratory relief in other circumstances. Instead, the underlying action should
proceed. If Gulf does not intervene and if Burris recovers a liability judgment
against Versa, and if execution is returned unsatisfied, Burris may sue Gulf
directly under Wis. Stat. §§ 632.22 and 632.24. Gulf may then assert its coverage
defenses (other than Versa’s non-compliance with the SIR).
Id. at 9.
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ANALYSIS
I.
GULF’S MOTION TO INTERVENE, BIFURCATE, AND STAY
A.
Intervention
On timely motion:
[t]he Court must permit anyone to intervene who: claims an interest relating
to the property or transaction that is the subject of the action, and is so
situated that disposing of the action may as a practical matter impair or
impede the movant’s ability to protect its interest, unless existing parties
adequately represent that interest.
Fed. R. Civ. P. 24(a). That is, apart from timely moving, the applicant for intervention
must (1) have a recognized interest in the subject matter of the litigation, (2) the interest
must be one that might be impaired by the disposition of the litigation, and (3) existing
parties must not provide adequate protection for that interest. United States v. Union
Elec., Co., 64 F.3d 1152, 1160 (8th Cir. 1995).
The Burrises do not oppose Gulf’s motion to intervene, and the Court finds that
Gulf meets the standard for intervention as of right. See Tweedle v. State Farm Fire &
Cas. Co., 527 F.3d 664, 671 (8th Cir. 2008) (“Nothing in Rule 24(a) precludes
postjudgment or even post-appeal intervention.”) Preliminarily, Gulf’s motion is timely.
See id. (relevant factors in determining timeliness include reason for delay and any
prejudice to the present parties).
Gulf has diligently pursued a judicial declaration
regarding its coverage obligations upon learning of its potential duty to defend Versa in
this case, and the Court will not hold any delay stemming from that action against it in
deciding this motion. Moreover, the Court finds no prejudice to the present parties in
permitting Gulf to intervene; indeed, the Burrises do not object. Gulf also has a direct
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and substantial interest in the outcome of the case. Gulf insured Versa, and the Burrises
allege that Gulf’s policy affords coverage for Versa’s potential liability. The Court finds,
therefore, that disposition of the liability action will, as a practical matter, impair Gulf’s
interests and that no party to the present dispute is adequately protecting Gulf’s interests
regarding coverage. See Union Elec., Co., 64 F.3d at 1160. Therefore, the Court will
grant Gulf’s unopposed motion to intervene pursuant to Federal Rule of Civil Procedure
24(a).
B.
Bifurcation and Stay
The Court may separate the trial of claims “[f]or convenience, to avoid prejudice,
or to expedite and economize.” Fed. R. Civ. P. 42(b). Trial courts have broad discretion
in determining whether to bifurcate. O’Dell v. Hercules, Inc., 904 F.2d 1194, 1201-02
(8th Cir. 1990). In exercising this discretion, the court should consider “the preservation
of constitutional rights, clarity, judicial economy, the likelihood of inconsistent results
and possibilities for confusion.” Id. at 1202. Moreover, as the Eighth Circuit observed,
under applicable Wisconsin law “the proper procedure for an insurance company to
follow when coverage is disputed is to request a bifurcated trial on the issues of coverage
and liability and move to stay any proceedings on liability until the issue of coverage is
resolved.” Newhouse by Skow v. Citizens Sec. Mut. Ins. Co., 501 N.W.2d 1, 6 (Wis.
1993); see also Elliott v. Donahue, 485 N.W.2d 403, 406 (Wis. 1992) (observing that
“the insurer should not only request a bifurcated trial on the issues of coverage and
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liability, but it should also move to stay any proceedings on liability until the issue of
coverage is resolved”).
The issue is whether bifurcation and stay is appropriate under the unique
procedural circumstances of this case, namely after dismissal of Gulf’s declaratory
judgment action without a definitive resolution of the coverage dispute. The Burrises
argue that Wisconsin law actually prevents bifurcation in this case because an insurer
can either request a bifurcated trial or file a declaratory judgment action, but not both,
and that the Eighth Circuit’s opinion “resolved all other coverage issues.”2 The Court is
not persuaded.
The Burrises present no Wisconsin case, and the Court has uncovered none,
proscribing bifurcation and stay under the unique procedural circumstances of this case.
The Burrises’ reliance on Grube v. Daun, 496 N.W.2d 106 (Wis. Ct. App. 1992) is
unhelpful. The issue in Grube was “whether an insurer who breached its duty to defend
can later contest coverage[.]” Id. at 123. The court did observe, in a discussion of the
procedures insurers can use to raise the coverage issue, that “the insurer could request a
bifurcated trial or a declaratory judgment so that the coverage issue would be addressed
separately by a court.” Id. at 123 (emphasis added). While bifurcation and a declaratory
judgment are phrased as alternatives in the dicta the Burrises cite, Grube does not stand
for the broad proposition that the Court cannot bifurcate coverage and liability issues
2
The Burrises’ third argument – that the Court should estop Gulf from denying coverage
because it wrongfully refused to defend Versa in the products liability action – is patently
meritless. The docket reflects that Gulf hired the Lind Jensen firm to defend Versa throughout
the case pursuant to a reservation of rights, while also pursuing a declaratory judgment that it had
no duty to defend.
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where the courts dismissed a procedurally proper declaratory judgment action without
resolving the coverage dispute.
Moreover, the Burrises’ reading of the Eighth Circuit’s opinion to state that Gulf
may only assert its coverage defenses after the Burrises prevail at trial of the liability
action is incorrect. The Court did recognize the following possible course of events: that
Gulf may not intervene in the liability action, that the Burrises might secure a liability
judgment against Versa, that the judgment might be returned unsatisified, and that the
Burrises then proceed directly against Gulf under Wisconsin’s direct action statutes.
(Op. at 9.) In such an action, Gulf might appropriately raise its remaining coverage
defenses. (Id.) But the opinion does not compel this result.3 And nothing in the opinion
purported to “resolve all other coverage issues,” as the Burrises argue. In short, neither
the Eighth Circuit’s opinion nor Wisconsin law forecloses the possibility of bifurcation
and stay in this case.
The Court finds that bifurcation and stay is appropriate under the circumstances
for several reasons. Gulf lodged two arguments in the declaratory judgment action on
which the courts have not yet passed: namely that the Gulf policy does not afford
coverage because it received no claim during the policy period and because Versa failed
to provide it with notice of the Burrises’ claim according to the policy terms. Resolution
of these issues may well affect the parties’ appetite for trial regarding Versa’s liability,
3
The appellate court used conditional language in discussing the prospect of the
Burrises’ pursuing recovery directly against Gulf: “If Gulf does not intervene and if Burris
recovers a liability judgment against Versa, and if execution is returned unsatisfied . . . .” (Op. at
9.) (emphases added). Here, Gulf has intervened.
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and it makes sense to follow the typical practice of determining coverage before liability
for that reason. See, e.g., Reid v. Benz, 629 N.W.2d 262, 270-71 (Wis. 2001) (observing
that coverage should typically be decided before liability). Both parties will benefit from
definitive resolution of the coverage dispute: Gulf will not continue to incur defense costs
in the liability suit without knowing its coverage obligations, and the Burrises will learn
whether insurance coverage stands behind the only remaining defendants in this case,
which are allegedly insolvent, before proceeding to trial of the liability issues. Moreover,
the remaining coverage dispute involves questions of whether a claim was received,
recorded, and/or reported during a specified time. By contrast, the liability case involves
questions of negligence in the design and manufacture of a ladder. Bifurcation is also
appropriate because these issues do not overlap and simultaneously presenting them to a
jury will likely be confusing. See O’Dell v. Hercules, Inc., 904 F.2d 1194, 1202 (8th Cir.
1990) (“[W]here the issues in a case are clearly separable, bifurcation is not an abuse of
discretion.”) Accordingly, the Court will bifurcate the proceedings and stay liability
proceedings pending resolution of the coverage dispute.
The Court is aware that bifurcation and stay will further delay these already
protracted proceedings. This result cannot reasonably be avoided. However, while the
Court has denied the Burrises’ 28 U.S.C. § 1927 motion for costs and fees incurred in
connection with the declaratory judgment action, in light of the Eighth Circuit’s opinion
and the resulting bifurcation and stay of these proceedings, the Court reserves the
possibility of exercising its inherent power to award the Burrises’ fees stemming from the
unexpected additional litigation of coverage at a later stage of the litigation.
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See
Chambers v. NASCO, Inc., 501 U.S. 32, 43-46 (1991) (discussing courts’ equitable power
to award attorneys’ fees, including to a party whose litigation efforts directly benefit
others).
ORDER
Based upon the foregoing, the submissions of the parties, the arguments of counsel
and the entire file and proceedings herein, IT IS HEREBY ORDERED that:
1. Gulf Underwriters Insurance Company’s Motion to Intervene, Bifurcate,
and Stay [Docket No. 103] is GRANTED.
2. Any party wishing to move for summary judgment on the coverage issue is
ordered to do so within thirty (30) days of this Order. Responses will be due per the
timeframe set forth in the Federal Rules of Civil Procedure.
DATED: September 4, 2012
at Minneapolis, Minnesota.
____s/
____
JOHN R. TUNHEIM
United States District Judge
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