Default no bar to contribution claim, Wisconsin Court of Appeals rules.

• Author: Ziemer, David

Byline: David Ziemer

A default judgment does not preclude the defendant from seeking contribution from other defendants, the Wisconsin Court of Appeals held on Dec. 28

SIVA Truck Leasing leased a van to Milwaukee Careers Cooperative (MCC) for use in its business of taking people to their jobs.

Four passengers were injured, and sued MCC, its insurer, Cincinnati Insurance Company, and the van's driver, Carlos Bates. Four months later, the passengers added SIVA and its insurer, Philadelphia Indemnity Insurance Company, as defendants, alleging that by insuring SIVA, Philadelphia Indemnity undertook to pay damages that might be caused by the negligence of anyone who drove a SIVA van with SIVA's consent, and that this included Bates.

Neither SIVA nor Philadelphia Indemnity answered the complaint, and default judgment was entered against them. After default, SIVA and Philadelphia Indemnity settled with the plaintiffs for more than $500,000. The plaintiffs also settled with Cincinnati Insurance, MCC, and Bates.

Philadelphia Indemnity then brought suit, seeking contribution from Cincinnati Insurance. Because of the default judgment, Milwaukee County Circuit Court Judge Clare L. Fiorenza dismissed the complaint.

Philadelphia Indemnity appealed, and the court of appeals reversed in a decision by Judge Ralph Adam Fine, holding that the default judgment did not bar the contribution action.

The court noted that, when no agreement expressly confers a right of contribution, such right is premised on only two conditions: (1) the parties must be liable for the same obligation; and (2) the party seeking contribution must have paid more than a fair share of the obligation. Kafka v. Pope, 194 Wis. 2d 234, 242-243, 533 N.W.2d 491, 494 (1995).

Rejecting Cincinnati Insurance's argument that the default judgment against Philadelphia Indemnity barred the contribution claim, the court reasoned, "neither the plaintiffs' dismissal of Cincinnati Insurance, nor Philadelphia Indemnity's settlement with the plaintiffs stands in the way of Philadelphia Indemnity's claim for contribution. As [Fire Insurance Exchange v. Cincinnati Insurance Co., 2000 WI App 82, 234 Wis.2d 314, 610 N.W.2d 98] recognizes, contribution 'can also be based on a settlement of what is contended to be joint liability, with the settling party being...