## Facts

- Matt E. Lucey worked for Strom Engineering Corporation (Strom), a Minnesota company.
- In March 2005, Lucey was in Wisconsin on a work assignment for Strom with a client in Racine, Wisconsin.
- Strom arranged for Enterprise Rent-A-Car Company, Inc. (Enterprise) to provide a rental vehicle for Lucey’s use while in Wisconsin.
- After work, Lucey went to a club with a coworker and discussed employment while drinking.
- In the early morning hours of March 13, 2005, in Oak Creek, Wisconsin, Lucey drove the rental car and was involved in a crash that injured Jake A. Kender.
- Kender sued Lucey, Strom, Enterprise, Auto-Owners Insurance Company (Auto-Owners, Strom’s insurer), Enterprise’s insurer (Empire Fire & Marine Insurance Company), and others in Wisconsin circuit court.
- Strom’s Auto-Owners auto policy was executed in Minnesota and included a Minnesota amendatory endorsement extending liability coverage to “any person using your automobile … with your permission.”
- The parties disputed whether Minnesota or Wisconsin law governed the meaning of “permission” in that endorsement:
  - Minnesota uses an “initial-permission” rule (broad coverage once initial permission is given, absent theft or conversion).
  - Wisconsin uses a “mere-deviation” rule (coverage may end with a material deviation from the scope of permission).
- Enterprise (and Empire) sought a declaratory judgment that Minnesota law applied, which would place Lucey within Auto-Owners’ coverage and limit Enterprise’s exposure.
- The circuit court granted declaratory judgment applying Minnesota law, concluded Auto-Owners provided coverage for Lucey, and denied Auto-Owners’ request to bifurcate and hold a separate coverage trial.
- Auto-Owners pursued an interlocutory appeal.

## Issues

1. Whether Minnesota or Wisconsin law governs interpretation of “permission” in the Minnesota amendatory endorsement to Strom’s Auto-Owners policy.
2. Whether the circuit court erred by denying Auto-Owners’ motion to bifurcate, stay, and conduct a separate trial on permissive use/coverage.

## Decision

- The Wisconsin Court of Appeals affirmed the declaratory judgment order.
- Minnesota law applied to the permissive-use question because the Auto-Owners policy was executed for a Minnesota insured and included a Minnesota-specific endorsement, supporting Minnesota as the state with the stronger connection to the coverage term at issue.
- Applying Minnesota’s initial-permission rule, Lucey was a covered permissive user as a matter of law because Strom initially permitted his use of the rental vehicle and his conduct did not amount to theft or conversion.
- The circuit court properly denied bifurcation, a stay, and a separate coverage trial because the governing legal rule resolved the permissive-use/coverage dispute without a need for a separate fact trial on deviations from permission.

## Legal Principles

- In a conflict-of-laws dispute over an insurance contract term, Wisconsin courts apply choice-of-law principles that look to which state has the most significant relationship to the issue, including where the policy was executed and delivered and the parties’ reasonable expectations.
- A policy endorsement written for a specific state (here, a Minnesota amendatory endorsement) is strong evidence that the parties expected that state’s law to govern interpretation of the endorsed coverage language.
- Under Minnesota’s initial-permission rule for omnibus/permissive-use coverage, once the named insured gives initial permission to use the vehicle, later deviations do not defeat coverage unless the use is equivalent to theft or conversion.
- A court may deny bifurcation and a separate coverage trial when the controlling law resolves coverage as a legal matter, making additional proceedings on permissive use unnecessary.

## Conclusion

The Wisconsin Court of Appeals held that Minnesota law governed the meaning of “permission” in Strom’s Minnesota-endorsed Auto-Owners policy, applied Minnesota’s initial-permission rule to find Lucey covered for the accident, and affirmed the circuit court’s refusal to bifurcate or conduct a separate coverage trial because coverage followed from the legal standard once initial permission was shown.


Kender v. Auto-Owners Ins. Co., 329 Wis. 2d 378 (2010)