author: ROGGENSACK, J.

text:
    Brittany Frost, by her Guardian ad Litem, Michael S. Anderson, and Tina Frost, Plaintiffs-Appellants, v. Doreen Whitbeck, Defendant, American Family Mutual Insurance Company, Defendant-Respondent.

    Court of Appeals

      No. 01-0327.

      Submitted on briefs July 9, 2001.

    Decided November 1, 2001.

    2001 WI App 289
    (Also reported in 638 N.W.2d 325.)

      On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Michael S. Anderson of Axley Brynelson, LLP of Madison.
    On behalf of the defendant-respondent, the cause was submitted on the brief of Virginia L. Newcomb and Paul F. Graves of Borgelt, Powell, Peterson & Frauen, S.C. of Madison.
    Before Vergeront, PJ., Dykman and Roggensack, JJ.

       Petition to review granted 3-19-02.

   ROGGENSACK, J.

¶ 1. Tina Frost and her daughter, Brittany Frost, sued Doreen Whitbeck and Doreen's insurer, American Family Mutual Insurance Company, for damages related to dog bites sustained by Brittany while she and her mother were staying in Doreen's home. The circuit court granted summary judgment dismissing all claims against American Family, after concluding that the Frosts' claims came within the policy's "intra-insured" exclusion for bodily injury to a resident relative. We conclude that the term "relative," used in the policy as an exclusion from coverage, is ambiguous and therefore, as construed against American Family, it does not exclude the Frosts' claims. Accordingly, the judgment and order of the circuit court are reversed, and we remand for further proceedings.

BACKGROUND

¶ 2. Tina and Brittany came to Wisconsin in May 1996 after Tina was divorced from her husband in Kentucky. Tina arranged to stay with Doreen in a home Doreen rented. The women, who were friends, had known each other since their teenage years. Apparently, Doreen's mother told them they were "shirttail" relatives. The supposed connection is that their great grandfathers, John Van Ert and Barney Van Ert, were brothers, and therefore, Doreen and Tina share a common great, great grandfather.

¶ 3. The intended duration of Tina's and Brittany's stay with Doreen was uncertain. Although Tina accepted a full-time job in Wisconsin and Brittany enrolled in a Wisconsin school in the fall of 1996, some of their belongings remained in Kentucky. In addition, Tina remained in contact with her ex-husband and told him that their stay in Wisconsin was not intended to be permanent. Doreen paid all of the rent while Tina and Brittany were living in the house, but Tina paid some of the utility bills.

¶ 4. Brittany returned to live with her father in Kentucky for the month of August and then permanently returned to Kentucky after being bitten by Doreen's dog in November 1996. This was the second time that Brittany had been bitten, and she suffered injuries on each occasion. In December of 1996, Tina returned to Kentucky, and two years later the Frosts sued for the dog bites, naming Doreen and her homeowner's insurer, American Family, as defendants.

¶ 5. American Family moved for summary judgment on coverage, arguing that Brittany was an "insured" for purposes of a bodily injury claim and that Doreen's policy contains an express exclusion for intra-insured claims. The policy provides in relevant part:

DEFINITIONS
5. Insured
a. Insured means you and, if residents of your household:
(1) your relatives; and
(2) any other person under the age of 21 in your care or in the care of your resident relatives.
EXCLUSIONS - SECTION II
11. Intra-insured Suits. We will not cover bodily injury to any insured.

(Emphasis in original.) The circuit court granted American Family's motion for summary judgment, concluding that the Frosts' claims came within the exclusion. The Frosts appeal, contending that Tina and Brittany were not resident relatives under Doreen's policy.

DISCUSSION

Standard of Review.

¶ 6. We review summary judgment decisions de novo, applying the same standards employed by the circuit court. Guenther v. City of Onalaska, 223 Wis. 2d 206, 210, 588 N.W.2d 375, 376 (Ct. App. 1998). We first examine the complaint to determine whether it states a claim, and then we review the answer to determine whether it joins a material issue of fact or law. Smith v. Dodgeville Mut. Ins. Co., 212 Wis. 2d 226, 232, 568 N.W.2d 31, 34 (Ct. App. 1997). If we conclude that the complaint and answer are sufficient to join issue, we examine the moving party's affidavits to determine whether they establish a prima facie case for summary judgment. Id. at 232-33, 568 N.W.2d at 34. If they do, we look to the opposing party's affidavits to determine whether there are any material facts in dispute that entitle the opposing party to a trial. Id.

¶ 7. Interpretation of a written insurance policy is a question of law, which we review without deference to the decision of the circuit court. Guenther, 223 Wis. 2d at 210, 588 N.W.2d at 377.

Resident-Relative Exclusion.

¶ 8. The dispute between the parties centers on the meaning of the terms "resident" and "relative" as used in Doreen's homeowner's policy. Tina and Brittany present three contentions: (1) there are material facts in dispute relevant to whether they were "residents" of Doreen's household when the injuries occurred; (2) American Family failed to produce admissible evidence sufficient to support a prima facie showing that Doreen is a relative of either Tina or Brittany; and (3) the policy's use of "relative" is ambiguous in regard to persons so remotely connected, and therefore, neither Tina nor Brittany comes within the policy's resident-relative exclusion. We base our decision on our agreement with their third contention.

¶ 9. The interpretation of an insurance policy is governed by the same rules of construction that apply to other contracts. Peace v. Northwestern Nat'l Ins. Co., 228 Wis. 2d 106, 120-21, 596 N.W.2d 429, 435-36 (1999). When the terms of an insurance policy are unambiguous, we will not rewrite the policy by construction. Taylor v. Greatway Ins. Co., 2001 WI 93, ¶ 10, 245 Wis. 2d 134, 628 N.W.2d 916. However, if words or phrases in a policy are susceptible to more than one reasonable construction, they are ambiguous, Smith v. Atlantic Mut. Ins. Co., 155 Wis. 2d 808, 811, 456 N.W.2d 597, 598-99 (1990), and ambiguous terms in exclusion clauses are narrowly construed against the insurer because the insurer is better situated to eliminate ambiguity. Peace, 228 Wis. 2d at 121, 596 N.W.2d at 436; Guenther, 223 Wis. 2d at 210-11, 588 N.W.2d at 377.

¶ 10. American Family contends that the term "relative" is unambiguous because its common meaning is a person related by blood or marriage to another. It contends that any reasonable insured would have this understanding of the term. American Family also argues that the common definition does not create an unreasonably broad exclusion, even when taken to its literal extreme of including absolutely anyone who has any relationship by blood or marriage no matter how many generations ago that relationship existed, because the exclusion will apply to a very distant relative only if that distant relative is also a resident of the policyholder's household. To be persuaded by American Family's argument, we would have to conclude that a reasonable policyholder would understand from reading the policy that by agreeing to host a distant relative in her home she would reduce the coverage available to her if she were held liable for bodily injury to that person, while such coverage would not be affected if she hosted a very close friend in her home under the same circumstances.

¶ 11. On the other hand, Tina and Brittany contend that, at some point, the fact that one shares a distant ancestor with another person becomes irrelevant to decisions that reasonable people make about their daily lives, including decisions about homeowner's insurance. They argue that a reasonable insured would not interpret "relative," as used in a resident-relative exclusion, to presumptively include all those persons with whom they share any remote ancestor by blood or by marriage no matter how many generations ago that occurred. Instead, they contend that a reasonable insured would understand "relative" to have a more restricted meaning. The Frosts do not indicate where a reasonable insured would draw the line, but they assert that the line falls somewhere short of persons who share only a great, great grandparent and who are separated, as the circuit court noted in this case, by ten degrees of kinship.

¶ 12. In construing the insurance policy, we note that it provides differing forms of coverage. For example, Section I generally provides coverage for first-party claims for property loss, with some exclusions from coverage for certain causes and types of loss. However, Section II of the policy provides coverage only for third-party claims, with the intra-insured suit exclusion as the mechanism used to accomplish this limitation.

¶ 13. In limiting Section II coverage to third-party claims, the policy does not exclude claims for bodily injury brought by all relatives, only those who are also residents of the policyholder's household. (Presumably, Doreen's mother could sue her for bodily injury if she lived in a house down the street, and the policy would potentially provide coverage.) Additionally, the policy does not exclude claims for bodily injury brought by all residents of the household, only those who are also relatives. (Presumably, Doreen's best friend could sue her for bodily injury even though they lived together, and the policy would potentially provide coverage.) However, when one recognizes that the purpose of the intra-insured suit exclusion is to preclude first-party claims, the closeness of the resident-relative connection necessary to accomplish this purpose becomes apparent. The degree of consanguinity or affinity must be such that a reasonable policyholder would understand that co-habitation would reduce the coverage available to her if she were held liable for bodily injury to that relative.

¶ 14. Stated another way, by excluding the claims of only those resident relatives who are closely enough connected by blood or marriage to the policyholder that their relationships are likely to be considered in the policyholder's personal decisions, such as contracting for homeowner's insurance, claims that are essentially first-party claims are precluded. Additionally, defining "relative" in an unlimited manner does not further the purpose of the intra-insured suit exclusion because excluding coverage for the claims of remote resident relatives would exclude third-party claims, a result inconsistent with the provisions of Section II. Furthermore, we note that if Tina were to be construed as a resident-relative insured under the policy, American Family would have exposure for third-party liability claims against Doreen, Tina and any number of shirttail relatives who may stay with Doreen. We question whether this level of consanguinity is what American Family bargained for in selling $100,000 of coverage for liability claims against any insured.

¶ 15. And finally, applying American Family's "no-matter-how-remote" construction of "relative" could create unexpected results from the perspective of an insured. For example, under American Family's limitless definition of "relative," the exclusion would apply even if the insured and another resident of the household had no idea that they were distant cousins and the insurer discovered a familial link through independent investigation. Given this possibility and the exclusion's purpose of limiting Section II coverage to third-party claims, we conclude that a reasonable policyholder would understand the resident-relative exclusion to be inapplicable in instances where the asserted degree of kinship, even if provable, is so remote that most people are either unlikely to know of the asserted relationship or unlikely to consider the relationship in matters such as contracting for homeowner's insurance. See Pamperin v. Milwaukee Mut. Ins. Co., 55 Wis. 2d 27, 36-37, 197 N.W.2d 783, 788-89 (1972) (concluding that whether the insured would consider the relationship in contracting for automobile insurance is one factor to consider in determining whether a person is a resident of the household).

¶ 16. American Family cites a number of cases from other jurisdictions where courts have determined that the term "relative" unambiguously applied, or did not apply, to the facts presented. For example, in Fidelity & Cas. Co. of New York v. Jackson, 297 F.2d 230, 231-32 (4th Cir. 1961), and Vernatter v. Allstate Ins. Co., 362 F.2d 403, 404 (4th Cir. 1966), the Fourth Circuit Court of Appeals noted that the term generally refers to a person connected by either blood or marriage, but held that the meaning can vary by context. Then, examining the underlying purpose of the exclusion at issue (to prevent the purchase of one policy of insurance to cover many cars), the specific policy language and the relationship of the relevant parties, the court concluded that "relative," as used in the policies, was not ambiguous. See Jackson, 297 F.2d at 233; Vernatter, 362 F.2d at 405-06. If the same facts were presented here, we would not disagree. Jackson involved a question of whether a mother-in-law was a relative, while Vernatter addressed the relationship between a defendant and his spouse's insured uncle. Both cases also involved exclusions in automobile insurance policies. Considering the purpose of the exclusions and the very close relationships by affinity involved in those cases, both Jackson and Vernatter could be resolved under the rule that there is no ambiguity where the court concludes that "only one meaning applies in the context and comports with the parties' objectively reasonable expectations." Sprangers v. Greatway Ins. Co., 182 Wis. 2d 521, 537, 514 N.W.2d 1, 7 (1994) (citing United States Fire Ins. Co. v. Ace Baking Co., 164 Wis. 2d 499, 503-04, 476 N.W.2d 280, 282 (Ct. App. 1991)).

¶ 17. Here, it is not true that under any reasonable construction of "relative" a distant cousin was clearly intended to be included as an insured. As explained above, there are at least two reasonable interpretations of "relative" in this case, and each interpretation leads to a different result. The distant relationship in question and the purpose of the exclusion at issue both serve to distinguish this case from Jackson and Vernatter. Additionally, we have considered, but do not find persuasive, the other cases cited by American Family. See, e.g., Groves v. State Farm Life & Cas. Co., 829 P.2d 1237 (Ariz. Ct. App. 1992) (concluding that an ex-son-in-law was not a resident relative under a homeowner's insurance policy). Accordingly, because "relative" is not defined in the policy and is susceptible to more than one reasonable construction, we construe it narrowly and in favor of affording coverage for the Frosts' claims.

CONCLUSION

¶ 18. We conclude that the term "relative," used in the policy as an exclusion from coverage, is ambiguous and therefore, as construed against American Family, it does not exclude the Frosts' claims. Accordingly, the judgment and order of the circuit court are reversed, and we remand for further proceedings.

By the Court. — Judgment and order reversed and cause remanded.

       In this opinion, we do not decide whether there are issues of material fact which would also preclude summary judgment based on the Frosts' first or second contention, as the issue we address is dispositive of coverage for bodily injury. Sweet v. Berge, 113 Wis. 2d 61, 67, 334 N.W.2d 559, 562 (Ct. App. 1983) (when one issue decides the question presented, we may choose not to address other issues also presented for review).

       The Frosts cite several statutory definitions of "relative," pointing out in particular those relatives who are entitled to take at intestacy. See Wis. Stat. § 852.01 (1999-2000). The Frosts have given us no reason to conclude that policyholders look to the intestacy statutes, or to any other statute, to define contractual terms. We conclude that statutory definitions are not relevant to the coverage question presented by this insurance contract.

       There is limited coverage for damage to the property of a house guest which damage occurs while the property is on the premises of the policyholder.

       Section II provides coverage for personal liability (Coverage D) and medical expenses (Coverage E).

       We do note that while the policy provides no exclusion for bodily injury damages under Section II D for a resident who is not also a relative, there is a potential exclusion for anyone except domestic employees "regularly residing on any part of the insured premises," for the $1,000 of medical expense coverage provided under Section II E. No party brings this condition of the policy to our attention, so we assume medical expenses under Section II E are not at issue in this lawsuit.

       Doreen's and Tina's degree of kinship is relevant because the policy's definition of "insured" includes children in the care of a resident relative. Brittany Frost's own blood-line link to Doreen, although more remote, is also relevant because Brittany is the person who directly suffered the bodily injury. However, as we conclude that the kinship shared between Doreen and Tina is not sufficient to invoke the policy's resident-relative exclusion, we also conclude that Brittany's link to Doreen is likewise too remote.

       American Family cites Groves v. State Farm Life & Cas. Co., 829 P.2d 1237 (Ariz. Ct. App. 1992), as well as several other cases in an attempt to show repeated recognition that the plain and common meaning of the term "relative" encompasses "a person related by blood or affinity." We will assume for the sake of argument that the common definition of "relative" does encompass persons related by blood or affinity. However, the pertinent question in this case is whether a reasonable insured in the position of Doreen would understand the term to encompass any person no matter how remote the relationship. This, in practical terms, is the construction that American Family urges. As explained above, we conclude that a reasonable person in the position of the insured would not have this understanding.


source: Caselaw Access Project

author: LUNDSTEN, J.

license: Public Domain

text:
    Heather R. Nugent, Plaintiff-Appellant, Unity Health Plans Insurance Corporation, Involuntary-Plaintiff, v. Charles A. Slaght and American Family Mutual Insurance Company, Defendants-Respondents.

      No. 00-1432.

      Submitted on briefs December 13, 2000.

    Decided November 8, 2001.

    2001 WI App 282
    (Also reported in 638 N.W.2d 594.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs oí Arthur E. Kurtz and Andrew J. Clarkowski of Axley Brynelson, LLP, Madison.
    On behalf of the defendant-respondent American Family Mutual Insurance Company, the cause was submitted on the brief of Patricia J. Epstein oí Peterson, Johnson & Murray, S.C., Madison.
    Before Vergeront, PJ., Dykman and Lundsten, JJ.
   LUNDSTEN, J.

¶ 1. Heather Nugent appeals from a summary judgment in favor of American Family Mutual Insurance Company. Nugent was injured in a car accident caused by Charles Slaght and she sued Slaght and American Family. The circuit court granted summary judgment, accepting American Family's argument that Slaght's policy had been cancelled prior to the accident and rejecting Nugent's waiver and equitable estoppel arguments.

¶ 2. We hold that the circuit court erred in granting summary judgment in favor of American Family. We agree with the circuit court's conclusion that American Family did not waive its cancellation defense. However, it appears the circuit court erroneously assumed that the elements of equitable estoppel were not present. Accordingly, we reverse and remand with directions.

I. Background

¶ 3. Prior to July 16, 1996, Charles Slaght had a valid auto insurance policy with American Family Mutual Insurance Company. The last premium payment Slaght made was received by American Family on June 16, 1996, and was sufficient to pay for coverage until July 16, 1996.

¶ 4. • Slaght's auto insurance policy contained a provision specifying that the policy "may" be cancelled for nonpayment by mailing a notice of cancellation not less than ten days prior to the effective date of the cancellation. On June 27,1996, American Family sent a notice to Slaght informing him that his policy "will be cancelled" on July 16, 1996, if his premium payment was not received by American Family by that date. We will assume for purposes of this decision that Slaght received the notice, but did not submit payment.

¶ 5. On July 19, 1996, Slaght caused a two-car collision in which Heather Nugent was injured. On July 22, 1996, an American Family employee made an entry in the company's record-keeping system cancelling Slaght's policy with an effective cancellation date of July 16, 1996. According to testimony from an American Family employee, it is the company's practice to delay entry of the cancellation into the company's record-keeping system in order to avoid recording a cancellation when a payment is received on time but not yet processed.

¶ 6. The American Family claims representatives assigned to handle the accident were not aware of the cancellation entry, apparently because the only check for cancellation they made was prior to the recording of the cancellation. A company employee testified that this failure was due to a flaw in American Family's internal procedures.

¶ 7. Nugent did not immediately file suit, but instead sought to obtain a settlement from Slaght and American Family. During a three-year period, from the time of the collision on July 19, 1996, and until it responded to Nugent's complaint on August 11, 1999, American Family acted as though Slaght had a valid policy in effect at the time of the collision. Among other things, American Family's claims representatives negotiated with Nugent, made payments to Nugent for property damage loss, made a settlement offer to Nu-gent, and reached a settlement with a passenger in Nugent's vehicle. American Family agrees that during this time period its claims representatives acted as though American Family was Slaght's insurer and that Nugent had no reason to suspect that Slaght's policy might not have been in effect at the time of the collision.

¶ 8. Nugent responded to American Family's actions by engaging in three years of negotiations and correspondence with American Family. She was interviewed by American Family representatives and responded to inquiries. She signed releases for confidential medical and employment records. She retained counsel and incurred the expense of filing suit. Finally, she did not pursue an uninsured motorist claim.

¶ 9. The parties were unable to fully settle, and on June 22, 1999, Nugent filed suit. American Family responded to the lawsuit by taking steps to verify Slaght's coverage and discovered the basis for asserting cancellation.

¶ 10. American Family moved for summary judgment on the ground that Slaght's policy had been cancelled prior to the accident. Nugent moved for summary judgment in her favor on grounds of waiver and equitable estoppel. The circuit court granted summary judgment in favor of American Family, concluding that the company did not waive its cancellation defense because it did not relinquish a right "which it knew that it had." The circuit court also rejected Nugent's equitable estoppel argument, but the basis for that decision is unclear.

II. Standard of Review

¶ 11. This court reviews summary judgment decisions de novo, applying the same standards as the trial court. Smith v. Dodgeville Mut. Ins. Co., 212 Wis. 2d 226, 232, 568 N.W.2d 31 (Ct. App. 1997). A party is entitled to summary judgment when there are no genuine issues of material fact and that party is entitled to judgment as a matter of law. Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315, 401 N.W.2d 816 (1987).

III. Discussion

A. Waiver

¶ 12. Waiver is often defined as the "voluntary and intentional relinquishment of a known right." E.g., Bank of Sun Prairie v. Opstein, 86 Wis. 2d 669, 681, 273 N.W.2d 279 (1979); Dussault v. Chrysler Corp., 229 Wis. 2d 296, 308, 600 N.W.2d 6 (Ct. App. 1999). However, "[t]his definition is misleading from the start. . . [because it] suggests that a waiver requires more purposefulness than the courts have generally required." David V. Snyder, The Law of Contract and the Concept of Change: Public and Private Attempts to Regulate Modification, Waiver, and Estoppel, 1999 Wis. L. Rev. 607, 625. Indeed, waiver can occur when the waiving party does not intend to waive. See Attoe v. State Farm Mut. Auto. Ins. Co., 36 Wis. 2d 539, 545, 153 N.W.2d 575 (1967) ("[I]t is not necessary to prove an actual intent to waive."); Rasmusen v. New York Life Ins. Co., 91 Wis. 81, 89, 64 N.W. 301 (1895) ("Doubtless, the act out of which the waiver is deduced must be an intentional act, done with knowledge of the material facts, but it cannot be necessary that there should be an intent to waive.").

¶ 13. Although the waiving party need not intend a waiver, he or she must act intentionally and with knowledge of the material facts. State v. Mudgett, 99 Wis. 2d 525, 530, 299 N.W.2d 621 (Ct. App. 1980); Rasmusen, 91 Wis. at 89. But here again, clarification is needed because the "knowledge" requirement may be satisfied by actual or constructive knowledge. Attoe, 36 Wis. 2d at 546. "Constructive knowledge is knowledge which one has the opportunity to acquire by the exercise of ordinary care and diligence." Wis JI — Civil 3057 (1993); see Attoe, 36 Wis. 2d at 546.

¶ 14. Based on the foregoing principles, Nugent argues that American Family waived its right to raise its cancellation defense because it acted inconsistently with asserting this defense for nearly three years while possessing constructive knowledge of all material facts. Nugent contends that American Family claims representatives had only to review the records of their own company to discover the facts supporting the cancellation defense, but failed to do so because they did not exercise ordinary care and diligence.

¶ 15. American Family responds that its claims representatives acted under a "mistake of fact." American Family quotes the following phrases from 56 Am. Jur Waiver § 14, at 114-15 (1947), which have been repeated several times in Wisconsin cases: "[i]gnorance of a material fact negatives waiver" and "[w]aiver cannot be established by a consent given under a mistake of fact." See, e.g., Ryder v. State Farm Mut. Auto. Ins. Co., 51 Wis. 2d 318, 326, 187 N.W.2d 176 (1971). American Family does not, however, attempt to reconcile this language with case law saying that "constructive" knowledge is sufficient. Regardless, we find that the waiver issue here is governed by the Ryder decision, which includes a holding that the knowledge of an insurance company adjuster in that case should not be imputed to another insurance company employee for purposes of showing waiver of a policy defense.

¶ 16. The pertinent facts of Ryder are these. An insured party made material misrepresentations to State Farm Insurance Company when applying for automobile insurance by failing to inform State Farm that he had several driving citations in recent years. Id. at 320-21. After State Farm issued a policy, the insured struck a pedestrian who eventually sued State Farm. Approximately two months after the accident, State Farm assigned an adjuster to investigate possible misrepresentation by the insured. The adjuster received "unconfirmed" information from the Milwaukee Police Department that the insured had several recent driving citations. Thereafter, a State Farm underwriting supervisor, unaware of the information from the Milwaukee Police Department, sent a memo to the insured's agent saying that State Farm would continue the insured's policy if he paid his renewal premium by the next renewal date. Id. at 320-23. The adjuster later received "official" information of the insured's misrepresentation and State Farm notified the insured that his policy had been "rescinded." Id. at 321-22.

¶ 17. In the context of the injured pedestrian's lawsuit, State Farm argued that it was not liable because the insured's policy had been rescinded. The pedestrian argued that State Farm waived its right to assert its policy defense by electing to renew the insured's policy. Id. at 325-26. One of the reasons the Ryder court gave for rejecting waiver applies here. The court found that even if State Farm's adjuster had information giving knowledge of the right to rescind the policy, its underwriting supervisor did not have the same information. Id. at 327. The Ryder court did not discuss constructive knowledge or the ease with which such information might have been shared within the State Farm organization. Instead, the court simply said: "the knowledge of one agent or employee is not imputed to another in these circumstances for the purpose of showing an intent of the insurer to waive a policy defense." Id. In support, the Ryder court pointed to two cases which held that when an insurance company employee, with no knowledge of a decision to rescind, mistakenly accepts premium payments, such action does not constitute waiver. Id.at 327-28, citing Ryan v. Rockford Ins. Co., 85 Wis. 573, 55 N.W. 1025 (1893), and Reserve Life Ins. Co. v. Howell, 357 P.2d 400 (Or. 1960).

¶ 18. In keeping with Ryder, we hold that when the claims representatives acted without knowledge held by other employees of American Family, such action did not constitute a waiver of the cancellation defense. While we might reach a different conclusion if writing on a clean slate, we think the Ryder decision contains the general directive that waiver does not occur when one employee mistakenly takes action inconsistent with a policy defense because he or she does not have knowledge held by a different employee of the same company.

B. Equitable Estoppel

¶ 19. Equitable estoppel may be applied when the inaction or action of a party induces reliance by another to that other person's detriment. Gonzalez v. Teskey, 160 Wis. 2d 1, 12, 465 N.W.2d 525 (Ct. App. 1990). Nugent argues that American Family should be equitably estopped from asserting its cancellation defense because the company's actions induced Nugent to waste time and exert resources. American Family responds in two ways. First, the company argues that the doctrine of equitable estoppel is inapplicable to the type of policy defense involved in this case. Second, the company disputes whether Nugent suffered "detriment."

1. Applicability of the doctrine of equitable estoppel to the type of cancellation defense asserted by American Family

¶ 20. American Family broadly asserts that equitable estoppel can never be used to resurrect an insurance policy that has been properly cancelled, regardless of actions subsequently taken by its employees. The company does not back up this assertion, but instead points to two cases that stand for a much more limited proposition. Both of these cases, Ingalls v. Commercial Insurance Co., 18 Wis. 2d 233, 118 N.W.2d 178 (1962), and Kamikawa v. Keskinen, 44 Wis. 2d 705, 172 N.W.2d 24 (1969), involved non-employee insurance agents who (1) made representations to insurance customers inconsistent with information the customers had received from the insurance company, and (2) did so without authorization from the insurance company. Neither case sheds light on the situation presented here, where the basis of claimed equitable estoppel is the actions of the insurance company's own employees.

¶ 21. American Family next makes a similar but narrower argument based on case law holding that equitable estoppel may not be used to create coverage. The court in Shannon v. Shannon, 150 Wis. 2d 434, 442 N.W.2d 25 (1989), stated the following: "The general .rule is well established that the doctrine of waiver or estoppel based upon the conduct or action of the insurer or its agent is not applicable to matters of coverage as distinguished from grounds for forfeiture." Id. at 450-51. In American Family's view, this language applies when a policy has been properly cancelled prior to an accident and a party seeks to use equitable estoppel to revive the policy because, American Family reasons, this revival creates new coverage. We disagree.

¶ 22. Shannon involved an insurance policy that excluded a relative of the insured from bodily injury coverage. While it was undisputed that policy language excluded the relative from this coverage, the relative argued that the insurance company waived its right to rely on the exclusion clause by acting inconsistently with such reliance for approximately eight months. Id. at 439, 450. The question in Shannon was not whether waiver or equitable estoppel could be applied when an insurance company acts inconsistently with its right to assert a cancellation or forfeiture defense. Instead, the question was whether waiver or equitable estoppel could be used to expand the scope of coverage under a policy. The Shannon court explained that these doctrines may not be used to create coverage that does not exist in the insurance policy. Id. at 453-54.

¶ 23. The fact that Shannon addressed the scope of coverage, and not forfeiture or cancellation situations, is apparent from language the court extensively quoted from its prior decision in Ahnapee & Western Railway Co. v. Challoner, 34 Wis. 2d 134, 148 N.W.2d 646 (1967):

[W]hile estoppel may be used to prevent an insurer from insisting upon conditions which result in forfeiture, estoppel has not been used in this state or in the majority of states as a means whereby the scope of coverage of an insurance policy can be expanded to include coverage which was not provided for or was excluded in the contract....
The rule that estoppel may apply to a forfeiture of benefits contracted for but cannot be successfully invoked to create a liability for benefits or coverage not contracted for was first laid down in this state in McCoy v. Northwestern Mut. Relief Asso. (1896), 92 Wis. 577, 66 N.W. 697 ....
Estoppel rules have consistently been held by this court not to apply to extend coverage... This court [has] refused to apply waiver or estoppel to enlarge coverage .... This court [has] held neither waiver nor estoppel could be used to enlarge the coverage of the policy....
What terms, conditions and provisions in a policy may be considered as forfeiture clauses and what language is considered essentially coverage is not always free from doubt. We think neither the type of insurance policy nor the form of language in the policy necessarily controls the question. The coverage provisions of the policy must, of course, be distinguished from its liability provisions. As a general rule, conditions and terms, either of an inclusionary or exclusionary nature in the policy, go to the scope of the coverage or delineate the risks assumed, as distinguished from conditions and terms which furnish a ground for the forfeiture of coverage or defeasance of liability.... 'While waiver and estoppel have been held applicable to nearly every area in which an insurer may deny liability, the courts of most jurisdictions agree that these concepts are not available to broaden the coverage of a policy so as to protect the insured against risks not included therein or expressly excluded therefrom. The theory underlying this rule seems to be that the company should not be required by waiver and estoppel to pay a loss for which it charged no premium, and the principle has been announced in scores of cases involving almost every conceivable type of policy or coverage provision thereof.'
What we have said applies both to waiver and equitable estoppel or estoppel in pais in the traditional sense in which those concepts are understood ....

Shannon, 150 Wis. 2d at 451-52, quoting Ahnapee, 34 Wis. 2d at 140-44 (emphasis added).

¶ 24. American Family points to that part of the above-quoted language which states: "The theory underlying this rule seems to be that the company should not be required by waiver and estoppel to pay a loss for which it charged no premium. . . ." However, in context, it is apparent that neither Shannon nor Ahnapee sets forth the general rule that an insurance company cannot be forced to provide coverage whenever it did not receive premium payment for the time period in question. Moreover, such a rule would be directly at odds with Peterson v. Truck Insurance Exchange, 65 Wis. 2d 542, 223 N.W.2d 579 (1974).

¶ 25. The insurance policy at issue in Peterson contained an "automatic lapse" clause providing that if the insured failed to make a timely monthly premium payment, the policy would automatically lapse and be void at the end " 'of the monthly period for which the premium had last been paid.'" Id. at 547 n.3. The insured in Peterson last made a monthly payment in September of 1971 and the policy should have automatically lapsed on October 18,1971. The accident giving rise to the claim occurred three months later, on January 16, 1972. Despite a valid "automatic lapse" clause, the Peterson court held that the insurance company might have waived its right to rely on the lapse clause by acting inconsistently with that clause. Id. at 549-50. The matter was remanded for further fact finding and resolution. Notably, the Peterson court rejected nearly the same argument that American Family makes here:

The insurance company cites Madgett v. Monroe County Mut. Tornado Ins. Co. (1970), 46 Wis. 2d 708, 176 N.W.2d 314, to the effect that an insurance policy cannot be created by estoppel if an insurance policy does not exist; that is true. However, Madgett is distinguishable from the instant case because there no contract of insurance ever existed between the plaintiff and the insurance company. It is our opinion that only a hearing can determine conclusively whether or not the insurance company in this case waived its right to have the policy lapse for nonpayment of premiums.

Id. at 550-51.

¶ 26. Thus, cases holding that waiver and equitable estoppel cannot be used to create coverage have no application here.

¶ 27. Finally, American Family argues that equitable estoppel should not be applied because the cancellation situation in this case is factually different from prior cases applying waiver and equitable estoppel to "automatic lapse" and "forfeiture" clause defenses. However, the company does not explain why the factual differences it identifies matter. For purposes of applying equitable estoppel, we perceive no relevant difference between "automatic lapse" clauses, "forfeiture" clauses, and the cancellation for nonpayment in this case. In all of these situations, an insurance company may, at its discretion, by action or inaction, enforce policy termination or, instead, act inconsistently with termination, thereby opening the door to the possible application of equitable estoppel. As stated in Couch on Insurance and quoted in Peterson with approval: " 'A provision for forfeiture, lapse or suspension for nonpayment of premiums, assessments, dues, or notes therefor when due, is for the benefit of the insurer, so that a waiver may be effected, or an estoppel created [by conduct or words of an insurer]. .. " Peterson, 65 Wis. 2d at 549, quoting 6 George J. Couch, Couch on Insurance 2d § 32.263, at 496 (1961).

¶ 28. Accordingly, we reject each of American Family's arguments offered in support of the proposition that equitable estoppel can never be used to bar defenses asserting policy cancellation prior to the event giving rise to potential liability.

2. Application of equitable estoppel analysis to the facts in this case

¶ 29. We now address the application of the doctrine of equitable estoppel to the facts in this case. Equitable estoppel has four elements: "(1) action or non-action, (2) on the part of one against whom estop-pel is asserted, (3) which induces reasonable reliance thereon by the other, either in action or non-action, and (4) which is to his or her detriment." Milas v. Labor Ass'n of Wisconsin, Inc., 214 Wis. 2d 1, 11-12, 571 N.W.2d 656 (1997). Proof must be clear, satisfactory, and convincing and must not rest on mere inference or conjecture. Gonzalez, 160 Wis. 2d at 13. "When the facts and reasonable inferences therefrom are not disputed, it is a question of law whether equitable estoppel has been established." Milas, 214 Wis. 2d at 8. This court determines questions of law independent of the circuit court. Id.

¶ 30. However, once the elements of equitable estoppel have been established as a matter of law, the decision to actually apply the doctrine to provide relief is a matter of discretion. See Gonzalez, 160 Wis. 2d at 13 ("The ultimate determination whether to apply estoppel is addressed to the trial court's discretion."); accord Williams v. Kaerek Builders, Inc., 212 Wis. 2d 150, 162, 568 N.W.2d 313 (Ct. App. 1997); Lohr v. Viney, 174 Wis. 2d 468, 476, 497 N.W.2d 730 (Ct. App. 1993); see also Hoefler v. Babbitt, 139 F.3d 726, 727 (9th Cir. 1998); A.C. Aukerman Co. v. R.L. Chaides Const. Co., 960 F.2d 1020, 1043 (Fed. Cir. 1992) ("[T]he trial court must, even where [the elements of equitable estoppel have been established], take into consideration any other evidence and facts respecting the equities of the parties in exercising its discretion and deciding whether to allow the defense of equitable estoppel to bar the suit."). In Mulder v. Mittelstadt, 120 Wis. 2d 103, 115-16, 352 N.W.2d 223 (Ct. App. 1984), this court explained:

An appeal to equity requires a weighing of the factors or equities that affect the judgment — a function which requires the exercise of judicial discretion. "The basis of all equitable rules is the principle of discretionary application." Yuba Consolidated Gold Fields v. Kilkeary, 206 F.2d 884, 889 (1953) (footnote omitted).
A trial court has the power to apply an equitable remedy as necessary to meet the needs of the particular case. Prince v. Bryant, 87 Wis. 2d 662, 674, 275 N.W.2d 676, 681 (1979).
[Elquity "has .. . never placed any limits to the remedies which it can grant, either with respect to their substance, their form, or their extent; but has always preserved the elements of flexibility and expansiveness, so that new ones may be invented, or old ones modified, in order to meet the requirements of every case." 1 Pomeroy, Equity Jurisprudence, § 111. Equity has "power to enlarge the scope of the ordinary forms of relief, and even to contrive new ones adapted to new circumstances." Ibid. § 116. If the customary forms of relief do not fit the case, or a form of relief more equitable to the parties than those ordinarily applied can be devised, no reason is perceived why it may not be granted.

Meyer v. Reif, 217 Wis. 11, 20, 258 N.W. 391, 394 (1935).

¶ 31. The only element of equitable estoppel that American Family seriously disputes is detriment. "Detriment" in this context is equated with "prejudice" and means " 'injury or damage.'" Milas, 214 Wis. 2d at 13, quoting City of Madison v. Lange, 140 Wis. 2d 1, 7, 408 N.W.2d 763 (Ct. App. 1987). This injury or damage must be "actual and material or substantial, and not merely technical or formal." 28 Am. Jur 2d Estoppel and Waiver § 83, at 508 (2000).

¶ 32. The circuit court held without explanation: "I do not think that the conduct of the insurance company rises to the level to support either waiver or estoppel." It appears the circuit court believed that the elements of estoppel are not present in this case. However, the undisputed facts show that Nugent suffered detriment. She engaged in three years of negotiations and correspondence with American Family. She was interviewed by American Family representatives and responded to inquiries. Nugent signed releases for confidential medical and employment records. She retained counsel and incurred the expense of filing suit. This detriment is not merely technical or formal.

¶ 33. American Family argues that Nugent did not suffer detriment because she can still pursue her uninsured motorist claim and because that is the only relief she would have had available if American Family never made its mistake. However, we agree with Nu-gent that the decision in Milas shows that this factor, standing alone, does not negate detriment. In Milas, an employee participated in an arbitration process with his former employer for approximately a year before the employer asserted that arbitration was not available under the employee's contract. Milas, 214 Wis. 2d at 12. The employer apparently argued that the employee should have and still could pursue a remedy by filing an action in circuit court. Id. at 7, 13. The Milas court acknowledged this alternative, but held that the employee suffered detriment by having to "invest time and resources" in the arbitration process. Id. at 13.

¶ 34. American Family also suggests that Nugent is better off than she would have been had American Family not made its mistake. American Family points out that it paid Nugent $9600 for property damage. American Family asserts that the money it paid to Nugent's passenger would have come out of Nugent's uninsured motorist coverage payments. We conclude that these arguments do not address the existence of the element of detriment, but are better directed at whether the circuit court should exercise its discretion to actually apply estoppel to bar the cancellation defense. Moreover, we cannot tell from the record or briefs before us whether these are actual benefits to Nugent. It may be that if Nugent is forced to pursue uninsured motorist coverage, American Family will seek to recover payments made, or that the company providing Nugent's uninsured motorist coverage will seek to set off prior payments by American Family against its own liability.

¶ 35. Accordingly, we hold that the elements of equitable estoppel have been established in this case. We remand on the separate question of whether the doctrine should actually be applied to bar American Family's cancellation defense because it does not appear that the circuit court exercised its discretion in this respect and we may not exercise discretion for the circuit court.

¶ 36. We acknowledge that our supreme court has, on at least one occasion, seemingly exercised discretion in deciding whether to apply equitable estop-pel after it determined as a matter of law that all of the elements of estoppel were present. E.g., Milas, 214 Wis. 2d at 13-15. However, we believe this approach is contrary to the supreme court's general directive that appellate courts not apply discretionary tests in the circuit court's stead. See, e.g., Wisconsin Ass'n of Food Dealers v. City of Madison, 97 Wis. 2d 426, 434-35, 293 N.W.2d 540 (1980) (discretionary decision to issue an injunction); King v. King, 224 Wis. 2d 235, 254, 590 N.W.2d 480 (1999) (discretionary decision to award maintenance to a former spouse). Furthermore, we do not believe that the undisputed facts are sufficiently developed to enable us to make the policy decision whether to apply equitable estoppel.

By the Court. — Judgment reversed and cause remanded with directions.

       The record shows that American Family sent Slaght the cancellation notice by first class mail. There is no suggestion in the record that Slaght did not receive this notice. An affidavit signed by an American Family employee states that no payments were received from Slaght after the June 16 payment.

       American Family informs us, and Nugent does not disagree, that Nugent has until July 19, 2002, to file a claim under her uninsured motorist policy.

         Ryder appears to be a departure from the general approach used when imputing knowledge to corporations. See Suburban Motors of Grafton, Inc. v. Forester, 134 Wis. 2d 183, 192, 396 N.W.2d 351 (Ct. App. 1986) (" 'corporation is charged with constructive knowledge, regardless of its actual knowledge, of all material facts of which its officer or agent receives notice or acquires knowledge while acting in the course of his employment within the scope of his authority, even though the officer or agent does not in fact communicate his knowledge to the corporation'") (quoting 3 W Fletcher, Cyolopedia of the Law of PRIVATE Corporations § 790 (rev. perm. ed. 1975)).

       American Family says that Webster v. Phoenix Insurance Co., 36 Wis. 67 (1874), is different because it involved a clause providing that if the insured purchased additional insurance for the insured's property from a company other than Phoenix without written consent from Phoenix, the policy would be void. The Webster court determined that Phoenix was estopped from relying on a "forfeiture" provision because, after a fire destroyed the property, Phoenix "required the [insured) to furnish plans and specifications of the insured house ... [which the insured furnished] at a large expense," while at the same time knowing the insured had purchased additional insurance from a different company prior to the fire. Id. at 69-72. Similarly, American Family points to Oshkosh Gas Light Co. v. Germania Fire Insurance Co., 71 Wis. 454, 37 N.W. 819 (1888). The policy in Oshkosh contained a forfeiture clause providing that the insurer could "void the policy" if there was a change to the property that increased the hazard without agreement of the insurer. The court held the forfeiture clause was waived because an adjuster with knowledge of an increased hazard ignored the forfeiture provision and negotiated with the insured. Finally, American Family says Peterson v. Truck Insurance Exchange, 65 Wis. 2d 542, 223 N.W.2d 579 (1974), is different because it involved an "automatic lapse" clause. In Peterson, an insured failed to make scheduled premium payments and the question on appeal was whether the insurance policy had lapsed due to nonpayment or if the policy should be deemed in effect due to waiver.


author: CURLEY, J. SCHUDSON, J.

text:
    Atlas Transit, Inc., Bee Bus Line, Inc., Dairyland Buses, Inc., Excel Bus Line, Inc., Johnson School Bus Service, Inc., Joy Farm Transportation, Inc., Laidlaw Transit, Inc., Lakeside Buses of Wisconsin, Inc., Lamers Bus Lines, Inc., Milwaukee Bus, Inc., Riteway Bus Service, Inc., Safe Line LLC, School Services & Leasing, Inc., Specialized Care Transport, Inc., and Suburban Services, Inc., Plaintiffs-Appellants, v. Dr. Spence Korte, Superintendent, Milwaukee Public Schools (or his Designee), Defendant-Respondent.
    Court of Appeals

      Nos. 01-0189, 01-0295.

      Submitted on briefs September 4, 2001.

    Decided November 13, 2001.

    2001 WI App 286
    (Also reported in 638 N.W.2d 625.)

      On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Kevin J. Kinney and Mark J. Goldstein of Krukowski & Costello, S.C., of Milwaukee.
    On behalf of the defendant-respondent, the cause was submitted on the brief of Roxane L. Crawford, assistant city attorney, and Grant F. Langley, city attorney.
    Before Fine, Schudson and Curley, JJ.

       Petition to review denied 1-29-02.

   CURLEY, J.

¶ 1. Atlas Transit, Inc., et al. (collectively, the "bus companies"), appeal from the trial court's orders denying their requests for a permanent injunction and a declaratory judgment prohibiting the Milwaukee Public Schools records custodian (MPS) from releasing the first and last names and commercial driver's license numbers of all their bus drivers (except six drivers) who transport children for the Milwaukee Public Schools following an open records request made pursuant to Wis. Stat. §§ 19.31-19.39 (1999-2000).

¶ 2. The bus companies argue that the trial court erred in affirming MPS's decision to release the information after balancing the public and private interests of those involved. The bus companies submit that under Wis. Stat. § 19.36(1) this information is exempted from disclosure by federal law. Further, the bus companies argue that the trial court erred in requiring them, rather than MPS, to notify the bus drivers of their right to file an objection to the release of information with the court. Finally, the bus companies submit that the trial court erred in determining that only six bus drivers should be exempted from the order out of the 801 drivers who filed an objection.

¶ 3. After balancing the rights of the interested parties, we are satisfied that the public interests in disclosure outweigh the private interests of both the drivers and the bus companies in withholding this information. Further, we determine the facts here are distinguishable from those in Kraemer Bros., Inc. v. Dane County, 229 Wis. 2d 86, 599 N.W.2d 75 (Ct. App. 1999), where we determined that the public interest in knowing this information was outweighed by the public’s interest in keeping the information confidential, id. at 103, and we conclude that the sought-after information is not exempt under Wis. Stat. § 19.36(1). We also are satisfied that the trial court's decision to exempt only six bus drivers from the release order was proper. Therefore, we affirm. Finally, inasmuch as this is a discretionary appeal of two non-final orders under Wis. Stat. §§ 808.03(2) and 809.50, and the bus companies failed to appeal the trial court's order requiring them to notify their drivers of their rights to object, we decline to address that issue. Cascade Mountain, Inc. v. Capitol Indem. Corp., 212 Wis. 2d 265, 268, 268 n.2, 569 N.W.2d 45 (Ct. App. 1997) (We may limit the issues on which an interlocutory appeal is granted, because review of every prior order in the action would contravene this court's general policy against piecemeal disposal of litigation.).

I. Background.

¶ 4. This appeal has its origins in a local television reporter's request to various bus companies who supply school buses for the Milwaukee and Waukesha school districts for disclosure of the names and birth dates of all bus drivers who were then driving their school buses. The reporter stated that his interest in receiving this information was to ensure that the bus drivers had the "appropriate backgrounds, credentials and driving records to be operating a school bus." The bus companies informed the reporter, by a letter written by their attorney, that they were unwilling to disclose this information.

¶ 5. After receiving this correspondence, the reporter then made an open records request pursuant to Wis. Stat. § 19.35 to the Milwaukee Public Schools (MPS). The reporter sought the roster of drivers that the bus companies were required to provide to MPS under their written contracts with MPS to transport children to and from school. A contract provision required the bus companies to supply MPS with a roster of drivers, including the driver's first and last name, and the commercial driver's license number of each driver. The contract also required the identical information to be given for "stand by" drivers. After receiving the request and consulting with legal counsel, MPS wrote the bus companies stating that MPS had balanced the public and private interests of those involved and had determined that the requested information should be released. However, it advised the bus companies that MPS would delay release of the information for fourteen days to permit the bus companies or the bus drivers to challenge its decision in the circuit court. MPS explained that, under the dictates of Woznicki v. Erickson, 202 Wis. 2d 178, 549 N.W.2d 699 (1996), it believed the obligation to notify the drivers of the decision to release this information lay with the bus companies, not MPS.

¶ 6. As a result, the bus companies filed suit seeking: a temporary restraining order and a permanent injunction preventing MPS from releasing the information; a declaratory judgment declaring that MPS could not release information concerning the bus companies drivers; and reimbursement for the bus companies' legal fees. The trial court issued a temporary restraining order, ordered briefs, and set a date for a hearing. At a hearing held on November 6, 2000, the trial court conducted its own balancing test of the interests involved in the release of the requested information and decided that the public interests in knowing the names and commercial driver's license numbers of the MPS bus drivers outweighed any public or private interests in keeping the information confidential. The trial court then ordered the bus companies to notify their 1400 bus drivers that an objection could be filed, along with the reasons for the objection, by November 20, 2000. The trial court also appointed a referee who received and evaluated the 801 objections filed by the bus drivers. On December 20, 2000, the referee sent the trial court a report of his findings. After receiving the report, the trial court ordered the release of the first and last names and commercial driver's license numbers of all bus drivers who did not file an objection. Several weeks later, the trial court ordered the release of the information for 795 bus drivers who filed objections, exempting six drivers who were identified by the referee as having legitimate reasons for nondisclosure of their identifying information. Also exempt from the trial court's order were numerous employees who filed objections but whose names did not appear on any of the provided rosters.

¶ 7. The bus companies then filed two separate petitions for leave to appeal the two non-final orders releasing the sought-after information. This court accepted the petitions and consolidated the appeals. After granting the petitions, this court issued a stay of the release of all sought-after information while this matter was pending.

II. Analysis.

¶ 8. The bus companies complain that the trial court's ruling permitting the release of information concerning their school bus drivers was erroneous for several reasons. The bus companies argue that: (1) MPS failed to give any reasons for its decision that a balancing of the public and private interests involved in the disclosure of the information resulted in the public's right to know being greater than any private interests, and MPS was obligated, under Woznicki and Klein v. Wisconsin Resource Center, 218 Wis. 2d 487, 582 N.W.2d 44 (Ct. App. 1998), to communicate its analysis to them, and its failure to do so invalidates their decision; (2) Like Kraemer Bros., Inc. v. Dane County, 229 Wis. 2d 86, 599 N.W.2d 75 (Ct. App. 1999), where an open records request seeking wage information for private employees working on a public work was denied, id. at 103-04, there is an overriding public interest in keeping this information confidential; (3) The trial court erred in its determination that the public's right to know information about the school bus drivers trumps the bus drivers' and the bus companies' rights which favor the nondisclosure of this information, and failed to take into account that the bus drivers would "suffer an immediate and irreparable invasion of privacy and reputational harm" as well as "suffer a risk to their lives and safety," and that the "requested personal information would constitute an unlawful disclosure of [the bus companies'] proprietary business information," exposing the bus companies to "legal and financial liability"; and (4) The sought-after information falls within the exception to the open records law embodied in Wis. Stat. § 19.36(1), exempting information prohibited by state or federal law. The bus companies further claim that because a federal law prevented this information from being disseminated by the Department of Motor Vehicles, MPS should not be allowed to release this information. We are not persuaded by any of their arguments.

A. The balancing test favors disclosure. '

¶ 9. The standard of review in cases dealing with open records requests is found in Woznicki: "Our courts have repeatedly held that the balancing of the public interests for and against disclosure is a question of law to be reviewed by a court de novo." Woznicki, 202 Wis. 2d at 192.

¶ 10. The bus companies claim that MPS failed to follow the Woznicki holding directing MPS, before releasing information sought under the open records law, to "consider all the relevant factors in balancing the public interest and the private interests." Id. at 191. The bus companies proffer that because no reasons accompanied the letter sent to the bus companies setting out exactly what factors were considered in arriving at a decision to release the information, MPS has not complied with the requirement and no information should be released. Relying on Klein v. Wisconsin Resource Center, 218 Wis. 2d 487, 582 N.W.2d 44 (Ct. App. 1998), they state that MPS has not fulfilled its duty under the case law. We disagree.

¶ 11. The MPS records custodian, after consulting with legal counsel, wrote and advised the bus companies that "After performing the balancing test required by law, I have determined that the public interest in releasing the rosters outweighs the harm to the public interest in permitting inspection."

¶ 12. We can find nothing in either Woznicki or Klein that requires the records custodian to prepare a detailed analysis of the factors used in applying the balancing test between public and private interests when determining whether to release information under Wis. Stat. § 19.35. Although the records custodian in Klein presented the requesters with a plethora of reasons for denying access to the requesters, the case law only mandates that the records custodian balance the competing interests for access against those favoring denial of the records. Thus, the records custodian is under no obligation to state his or her reasoning, only the resulting conclusion. As noted in Woznicki, "it is the duty of the custodian of public records, prior to their release, to consider all the relevant factors in balancing the public interest and the private interests." Woznicki, 202 Wis. 2d at 191. MPS's records custodian fulfilled his legal obligation when, after consulting with legal counsel, he "performed the balancing test required by law" and determined that the records should be released.

¶ 13. Moreover, even if an obligation exists to explain the decision to release the information, the trial court conducted a detailed balancing of the interests involved. In its preliminary decision finding that the information should be released, the trial court declared:

This court is obliged to observe that the schools of today hold a hope for tomorrow. No greater obligation of citizenship exists than that which gives our children an open and well administered school system. In the case at bar, it would appear clear that safe and well administered transportation to and from our public schools is of importance to the parents, to the future of our society, and most of all, of value to the children whose education is part of the charge to our government.
Clearly, the exercise of due diligence on the part of the parents, the school system and the authorities, requires knowledge, and the failure to supply those names and commercial driver's licenses will adversely affect the confidence of the public. And in fact, by raising the issue, creating a suspicion that all might not be well in the transportation business.

¶ 14. "Whether harm from disclosure outweighs the public interest in permitting broad access to public records is a question of law to be reviewed de novo." Klein, 218 Wis. 2d at 496. In fulfilling our obligation on review, we are led to the identical conclusion as that of the records custodian and the trial court. First, the public policy behind the open records law clearly favors disclosure. This policy is articulated in Wis. Stat. § 19.31:

19.31 Declaration of policy. In recognition of the fact that a representative government is dependent upon an informed electorate, it is declared to be the public policy of this state that all persons are entitled to the greatest possible information regarding the affairs of government and the official acts of those officers and employees who represent them. Further, providing persons with such information is declared to be an essential function of a representative government and an integral part of the routine duties of officers and employees whose responsibility it is to provide such information. To that end, ss. 19.32 to 19.37 shall be construed in every instance with a presumption of complete public access, consistent with the conduct of governmental business. The denial of public access generally is contrary to the public interest, and only in an exceptional case may access be denied.

Thus, under the statute, we must presume that the records should be disclosed. Secondly, after examining the reasons given for and against releasing the names and commercial driver's license numbers of the bus companies' school bus drivers, we conclude that disclosure is necessary. As noted in the thoughtful and articulate decision of the trial court, the public's confidence in the school system and the public's interest in the safety of its children are implicated in this open records request. These are strong factors in favor of disclosure.

¶ 15. Further, we reject the bus companies' claim that the release of the drivers' names and commercial driver's license numbers would result in the bus drivers "suffering] an immediate and irreparable invasion of privacy and reputational harm," as well as "suffering] a risk to their lives and safety."

¶ 16. The bus companies believe that releasing the information of their bus drivers presents an identical situation as that found in Milwaukee Teachers' Education Ass'n v. Milwaukee Bd. of School Directors, 227 Wis. 2d 779, 596 N.W.2d 403 (1999), where the criminal records of teachers were sought. They contend the release will reveal "embarrassing facts in some of [the bus drivers] personal histories" and "the release . .. would tarnish their reputations, and undermine their authority with students." Further, they contend the release of the requested information would endanger the bus drivers' lives and safety because the information "might assist third parties in discovering their home addresses and/or telephone numbers."

¶ 17. Although the release does invade the privacy rights of the individual drivers, the invasion is slight, as the only information given is the driver's name and commercial driver's license number. The address, age, and other identifying information of the bus drivers are not being released. Unlike the situation in Milwaukee Teachers', the released information is not itself embarrassing, nor is it likely to lead others to discover the personal histories of the bus drivers. The bus companies give us no concrete examples of how revealing the name and commercial driver's license number of a driver will result in the discovery of other personal information. We also fail to see how knowing the name of a bus driver will adversely impact bus discipline. Thus, we conclude that the bus companies' prediction of dire consequences occurring if the bus drivers' names and commercial driver's license numbers are released is not supported by the record.

¶ 18. We are also not convinced by the bus companies' claim that the release of their bus drivers' names and commercial driver's license numbers will result in "an unlawful disclosure of proprietary business information." The underpinnings for this argument is the bus companies' contention that competitors will access this information and, after doing additional research, recruit their employees. The information will not lead to the automatic disclosure of the addresses of the bus drivers given the limited information being released. Because the information being given is quite limited, it is unlikely that a company will go to the trouble of researching the names in order to recruit drivers. Moreover, had the bus companies been concerned about others learning their bus drivers' names, they should have negotiated a contract with MPS deleting this requirement. In any event, the possibility of competing bus companies recruiting each others' bus drivers does not defeat the public's right to know who is driving its school buses.

¶ 19. Finally, we decline to address the bus companies' complaint that the release of information concerning their bus drivers will expose them to legal and financial liability. See State v. Waste Mgmt., Inc., 81 Wis. 2d 555, 564, 261 N.W.2d 147 (1978) (stating that an appellate court is not a performing bear required to dance to each and every tune played on appeal). As argued by the City, "there is absolutely no support for the bald assertion ... that failure on their part to contact each... school bus driver of MPS' decision to release [the sought-after information] would expose them to liability under sec. 895.50, Stats." (footnote added).

B. No Federal or State law prevents the disclosure of the requested information.

¶ 20. Next, the bus companies argue that the trial court erred in releasing the sought-after information because it fell within a statutory exclusion found in Wis. Stat. § 19.36(1) prohibiting the release when "[a]ny record... is specifically exempted from disclosure by state or federal law." They claim that the release of the names and commercial driver's license numbers of the bus drivers is information barred by the federally-enacted Driver's Privacy Protection Act (DPPA).

¶ 21. The DPPA prohibits a state department of motor vehicles from releasing "personal information." 18 U.S.C. § 2721-2725. Under the Act, "personal information" is defined as:

[I]nformation that identifies an individual, including an individual's photograph, social security number, driver identification number, name, address (but not the 5-digit zip code), telephone number, and medical or disability information, but does not include information on vehicular accidents, driving violations, and driver's status.

18 U.S.C. § 2725(3). The bus companies concede that the act applies only to the Department of Motor Vehicles, not to MPS. However, they argue that because the DPPA prohibits the Department of Motor Vehicles from releasing this information, by analogy, MPS, another governmental agency, should not be allowed to release it either. Also, the bus companies contend that the underlying reasons for the DPPA's passage are present here. We disagree with both arguments.

¶ 22. We observe, as the bus companies concede, that the DPPA does not prohibit the release of this information by MPS. Therefore, there is no exclusion under Wis. Stat. § 19.36. Indeed, the statute limits the exemption only to "any record which is specifically exempted from disclosure by state or federal law." Wis. Stat. § 19.36(1) (emphasis added). This restriction on exempting only specific information prohibited from disclosure by state or federal law is in keeping with the public policy in this state that entitles persons to "the greatest possible information regarding the affairs of government," noting that "[t]he denial of public access generally is contrary to the public interest, and only in an exceptional case may access be denied." Wis. Stat. § 19.31.

¶ 23. Moreover, the purpose of the DPPA was to stop the practice of many state departments of motor vehicles from the wholesale selling of personal information to third parties. Clearly, that practice is not implicated here. Additionally, assuming the DPPA's reach included MPS, the act contains several exceptions that appear to exempt the sought-after information. Exceptions exist permitting disclosure in connection with matters of motor vehicle or driver safety (see 18 U.S.C. § 2721(b)), and use by an employer to obtain or verify information related to a holder of a commercial driver's license (see 18 U.S.C. § 2721(b)(9)). In sum, the DPPA does not prohibit MPS from releasing information on drivers collected by a private employer, and, even if it did, several exceptions appear to permit this type of use of the information.

C. The trial court's decision to exempt only six bus drivers was proper.

¶ 24. The bus companies argue that the trial court erred when it excluded only six bus drivers out of the 801 objecting bus drivers from its order. This followed the trial court's consideration of the report of the referee in which the referee evaluated the objections. The referee determined that only six of the drivers stated compelling reasons for the nondisclosure of their names and commercial driver's license numbers. The referee identified another group of 36 who claimed that they had restraining orders or other legal actions involving their safety. The referee suggested limiting the information being given for that group. Out of the remaining number, the vast majority of the objectors stated that they were objecting on the basis of the open records request being an invasion of their privacy. The bus companies assert that, at a bare minimum, the trial court should have excluded the 36 bus drivers who raised an objection based upon the existence of a restraining order or other legal proceeding and the bus companies urge this court to exclude all the names of bus drivers who registered an objection. We decline to do so.

¶ 25. After reviewing the record, we note that the trial court balanced the right of the objecting parties against the public's "right to know who in the public transportation community are entrusted with the safety of our children." It found, given the limited information to be released, the right of privacy did not defeat the rights of the public to know their bus drivers' names and license numbers. Although not articulated, the trial court implicitly found that the 36 people having restraining orders or other legal proceedings would not be endangered by the release of only their names and commercial driver's license numbers. As stated previously, the policy in this state presumes that information concerning the citizenry should be disclosed. As noted, the safety of our students while riding a school bus and public confidence in the school system are strong factors weighing in favor of disclosure.

¶ 26. We conclude that the public has a right to know the names of the individuals who are driving their children to and from school, and a right to be assured that every bus driver has a valid commercial driver's license. Accordingly, we affirm.

¶ 27. Finally, both parties ask us to seal the objections submitted by the bus drivers and the evaluation of these records by the referee. We agree. Our review of the referee's report discloses that in their written responses objecting to the release of the information concerning them, the bus drivers often revealed sensitive and confidential information to the referee which need not become part of the public record.

By the Court. — Orders affirmed.

SCHUDSON, J.

¶ 28. (dissenting). Because the record establishes that the Milwaukee Public Schools' records custodian carried out the balancing test, required by Woznicki v. Erickson, 202 Wis. 2d 178, 549 N.W.2d 699 (1996), without accurate and appropriate consideration of federal law, I would remand.

¶ 29. On October 13, 2000, Michael Turza, MPS Director of Business Services, advised the bus companies:

After performing the balancing test required by law, I have determined that the public interest in releasing the rosters outweighs the harm to the public interest in permitting inspection. Accordingly, after conferring with the City Attorney's Office, I have determined that it is appropriate to provide the requester with access to the rosters.

Mr. Turza's determination, apparently, was based on the October 10, 2000 letter from City Attorney Grant F. Langley and Assistant City Attorney Roxane L. Crawford answering MPS Deputy Superintendent Willie Jude's inquiry on how to respond to Fox 6 News' request for the bus driver rosters. The City Attorney's eight-page letter, while thorough and thoughtful in many respects, misconceived the relevant federal law in one critical way.

¶ 30. The federal Driver's Privacy Protection Act (DPPA), 18 U.S.C. §§ 2721-2725, prohibits state departments of motor vehicles from releasing "personal information," which the DPPA defines as:

information that identifies an individual, including an individual's photograph, social security number, driver identification number, name, address (but not the 5-digit zip code), telephone number, and medical or disability information, but does not include information on vehicular accidents, driving violations, and driver's status.

18 U.S.C. § 2725(3). The bus companies concede that although the DPPA would preclude the state motor vehicle department from releasing the information requested in this case, it would not preclude MPS from doing so. Significantly, however, the bus companies point out, and the City agrees, that, under Kraemer Bros., Inc. v. Dane County, 229 Wis. 2d 86, 599 N.W.2d 75 (Ct. App. 1999), a custodian of records, when balancing the interests for and against disclosure, properly considers the extent to which relevant federal law provides guidance.

¶ 31. MPS correctly contends that by excluding driving records from the federal definition of "personal information," see 18 U.S.C. § 2725(3), Congress made a "clear statement that the public has a strong interest in gaining access to an individual [bus driver's driving] record." But, inexplicably, MPS ignores the critical distinction between a bus driver's driving record and his or her identity. While, on the one hand, the federal law specifically exempts "information on vehicular accidents, driving violations, and driver's status" from the definition of protected "personal information," it does not exempt the "information that identifies an individual." See 18 U.S.C. § 2725(3).

¶ 32. Failing to acknowledge this critical distinction, the City Attorney failed to account for the possibility that, consistent with the apparent policy of the DPPA, MPS could both disclose "information on vehicular accidents, driving violations, and driver's status" and, at the same time, maintain the privacy of "personal information" — "information that identifies an individual, including an individual's photograph, social security number, driver identification number, name, address (but not the 5-digit zip code), telephone number, and medical or disability information." See 18 U.S.C. § 2725(3).

¶ 33. The bus companies offer a clear and compelling argument: "Simply put, the drafters of the DPPA could never have intended that other government agencies be compelled to disclose precisely the same 'personal information' protected by the DPPA... They may be correct. Here, however, MPS, misunderstanding the most critical component of the relevant federal law, could not have considered its disclosure options and, therefore, could not truly have considered the bus companies' argument.

¶ 34. A proper balancing test, under Woznicki and Kraemer Bros., required an accurate reading of the DPPA. MPS, relying on the City Attorney, failed to recognize the critical distinction drawn by the DPPA and, therefore, failed to consider the possible propriety of disclosing the drivers' driving records while, at the same time, protecting the drivers' identities. Thus, the case should be remanded for MPS to properly weigh the competing interests and determine whether, and to what extent, disclosure is appropriate. Accordingly, I respectfully dissent.

       The other bus companies who sued are Bee Bus Line, Inc., Dairyland Buses, Inc., Excel Bus Line, Inc., Johnson School Bus Service, Inc., Joy Farm Transportation, Inc., Laidlaw Transit, Inc., Lakeside Buses of Wisconsin, Inc., Lamers Bus Lines, Inc., Milwaukee Bus, Inc., Riteway Bus Service, Inc., Safe Line LLC, School Services & Leasing, Inc., Specialized Care Transport, Inc., and Suburban Services, Inc.

       All references to the Wisconsin Statutes are to the 1999-2000 version unless otherwise noted.

       Wisconsin Stat. § 19.36(1) provides:
      Limitations upon access and withholding. (1) Application of other laws. Any record which is specifically exempted from disclosure by state or federal law or authorized to be exempted from disclosure by state law is exempt from disclosure under s. 19.35(1), except that any portion of that record which contains public information is open to public inspection as provided in sub. (6).

       Pursuant to the holding in Woznicki v. Erickson, 202 Wis. 2d 178, 549 N.W.2d 699 (1996), the trial court ordered briefs to be submitted on the issue of whether the six people identified by the referee should have their names and commercial driver's licenses released. These six people are not involved in this appeal.

       WisConsin Stat. § 895.50 provides:
      Right of privacy. (1) The right of privacy is recognized in this state. One whose privacy is unreasonably invaded is entitled to the following relief:
      (a) Equitable relief to prevent and restrain such invasion, excluding prior restraint against constitutionally protected communication privately and through the public media;
      (b) Compensatory damages based either on plaintiffs loss or defendant's unjust enrichment; and
      (c) A reasonable amount for attorney fees.

        (2) In this section, "invasion of privacy" means any of the following:
      (a) Intrusion upon the privacy of another of a nature highly offensive to a reasonable person, in a place that a reasonable person would consider private or in a manner which is actionable for trespass.
      (b) The use, for advertising purposes or for purposes of trade, of the name, portrait or picture of any living person, without having first obtained the written consent of the person or, if the person is a minor, of his or her parent or guardian.
      (c) Publicity given to a matter concerning the private life of another, of a kind highly offensive to a reasonable person, if the defendant has acted either unreasonably or recklessly as to whether there was a legitimate public interest in the matter involved, or with actual knowledge that none existed. It is not an invasion of privacy to communicate any information available to the public as a matter of public record.
      (3) The right of privacy recognized in this section shall be interpreted in accordance with the developing common law of privacy, including defenses of absolute and qualified privilege, with due regard for maintaining freedom of communication, privately and through the public media.
      (4) Compensatory damages are not limited to damages for pecuniary loss, but shall not be presumed in the absence of proof.
      (6) (a) If judgment is entered in favor of the defendant in an action for invasion of privacy, the court shall determine if the action was frivolous. If the court determines that the action was frivolous, it shall award the defendant reasonable fees and costs relating to the defense of the action.
      (b) In order to find an action for invasion of privacy to be frivolous under par. (a), the court must find either of the following:
      1. The action was commenced in bad faith or for harassment purposes.
      2. The action was devoid of arguable basis in law or equity.

        (7) No action for invasion of privacy may be maintained under this section if the claim is based on an act which is permissible under ss. 196.63 or 968.27 to 968.37.

       The referee apparently believed additional information such as addresses, phone numbers and employers was sought in ■ the open records request.