Appeals court clarifies coverage when auto lessee uninsured,
no certificate of insurance filed
The plaintiffs were injured by a driver who leased a car from Nissan,
but did not have insurance. Recently, a state appeals court ruled the
auto dealer’s insurance company must pay statutory damages,
because the dealer did not file a certificate of insurance on the
By org jforward wisbar Joe Forward, Legal Writer,
State Bar of Wisconsin
March 21, 2012 – Under a 2007 lease agreement with Nissan,
Michael Kuester was supposed to maintain auto liability
insurance. He didn’t. But Nissan didn’t file a certificate
of insurance with Wisconsin’s Department of Transportation when it
leased the car.
That means Nissan’s insurer, Tokio Marine & Nichido Fire Insurance Company, must pay
statutory minimums to those injured in an auto accident caused by the
uninsured Kuester, who later pled guilty to causing great
bodily harm while driving under the influence of drugs.
Deanna Brown (driver) and Cynthia Eulenbach
(passenger) sued Kuester and Tokio Marine, which had
issued a $5 million business auto insurance policy to Nissan. Tokio argued that its policy with Nissan did
not cover damages caused by a lessee, in this case Kuester.
v. Tokio Marine & Nichido Fire Ins.
Co., 2011AP454 (March 21, 2012), the District II
Wisconsin Court of Appeals affirmed a circuit court ruling that
Nissan’s policy with Tokio Marine did not
cover lessees and Wisconsin’s omnibus coverage statute did not
mandate coverage. But the court also affirmed that
Nissan’s failure to comply with another statute created
Lessees and policies issued or delivered outside
Tokio Marine’s insurance policy contained
a specific exclusion of coverage for Nissan’s lessees. However,
the plaintiffs argued that Wisconsin law overrode the exclusion.
Under Wis. Stat. section 632.32(3)(b),
auto insurance policies issued or delivered to an automobile owner
“extends to any person legally responsible for the use of the
The plaintiffs argued that Kuester was legally
responsible for use of the leased vehicle owned by Nissan, and Nissan
had an auto insurance policy with Tokio Marine.
Tokio Marine argued that section 632.32
(omnibus coverage statute) only applies to policies issued or delivered
in Wisconsin (Tokio Marine mailed the business auto insurance
policy covering Nissan from California to Nissan’s office in
The appeals court held that policies issued or delivered outside
Wisconsin are still subject to section 632.32 if the policy incorporates
section 632.32 provisions into the policy.
Tokio Marine’s policy did. It contained a
“Wisconsin Changes” endorsement consistent with Wisconsin
law on coverage for vehicles used with an owner’s permission.
Thus, the appeals court held that Tokio Marine
incorporated Wisconsin’s omnibus coverage statute for auto
insurance into the policy with Nissan. However, it ruled that the
policy’s exclusion for lessees was consistent with Wisconsin law
under section 632.32(5)(e).
“Tokio Marine’s lessee exclusion
conforms to the omnibus coverage statute and § 632.32(3) does not
mandate coverage for Kuester,” wrote
appeals court Judge Paul Reilly.
No certificate of insurance filed
Although the appeals court upheld the policy’s exclusion for
lessees, the court ruled that Wis. Stat. section 344.51(1m)
mandated coverage for damages sustained by the plaintiffs.
Section 344.51(1)(m) requires a lessor, before leasing the vehicle, to
file a certificate with the Department of Transportation ensuring the
vehicle is covered with liability insurance. Failure to comply means
violators are responsible for future damages under section 344.01(2)(d).
Nissan did not file the certificate of insurance. Tokio Marine did not
dispute that it was liable for Nissan’s violation of that statute
under its insurance policy with Nissan.
“Nissan’s failure to file a certificate of insurance with
the Department of Transportation when it leased the vehicle to Kuester
means that Tokio Marine is liable to Brown and Eulenbach in the amounts
of $25,000 per person and $50,000 per accident,” Judge Reilly