Deadlines Surrounding the Non-Permissive Use Defense That Should Keep You Up at Night

By: William A. Brookley, Cross, Jenks, Mercer & Maffei, LLP

As you review a new claim file and begin your initial investigation into possible defenses, you learn the insured vehicle was operated by an individual without the owner’s consent and/or permission. This article addresses the steps you must take to ensure you do not inadvertently waive the defense of non-permissive use. As set forth in Wisconsin Statute § 344.15(4)-(5):

After receipt of the report of an accident of the type specified in s. 344.12, the secretary may forward to the insurer named therein, that portion of the report or other notice which pertains to an automobile liability policy or bond. The secretary shall assume that an automobile liability policy or bond as described in this section was in effect and applied to both the owner and operator with respect to the accident unless the insurer notifies the secretary otherwise within 30 days from the mailing to the insurer of that portion of the report or other notice pertaining to the automobile liability policy or bond… 

Nothing in this chapter shall be construed to impose any obligation not otherwise assumed by the insurer in its automobile liability policy or bond except that if no correction is made in the report or other notice within 30 days after it is mailed to the insurer, the insurer, except in case of fraud, whenever such fraud may occur, is estopped from using as a defense to its liability the insured’s failure to give permission to the operator or a violation of the purposes of use specified in the automobile liability policy or bond or the use of the vehicle beyond agreed geographical limits.[1]

In other words, an insurer has only thirty days from the date it receives an accident report, or other notice from the Department of Transportation, to notify the department that the individual operating the vehicle did not have the owner’s permission to do so at the time of the accident.[2] 

Wisconsin Courts have narrowly construed this requirement, finding the 30-day notice requirement under the statute is mandatory. For example, in Midwest Mutual Insurance Co. v. Nicolazzi, the plaintiff was operating a motorcycle when he was involved in a collision with an automobile on April 28, 1984.[3] The automobile was owned by a different individual than the one operating it at the time of the collision.[4] After suit was filed, defendant’s insurer admitted it issued a liability policy to the owner of the automobile but alleged it was being operated without the owner’s consent and permission when the accident occurred.[5] Plaintiff later brought a motion to strike the defense on the grounds that defendant’s insurer failed to comply with Wisconsin Statute § 344.15.[6]

Defendant’s insurer first learned of the accident on May 8, 1984.[7] Upon investigation, the insurer sent the defendant-owner an affidavit to be signed before a notary public for purposes of complying with Wisconsin Statute § 344.15.[8] Formal notice of the accident was given to defendant’s insurer by the Department of Transportation on July 13, 1984.[9] The insurer forwarded the defendant-owner’s affidavit to the department on July 23, 1984, but the defendant-owner failed to get it properly notarized.[10] 

The affidavit was rejected by the department and sent back to the insurer on July 30, 1984.[11] The insurer immediately sent a new copy of the affidavit to the defendant-owner and requested that she get it notarized immediately.[12] In the meantime, the 30-day deadline for the insurer expired on August 13, 1984.[13] The defendant-owner finally returned a notarized affidavit to its insurer on October 8, 1984, who then immediately forwarded it to the Department of Transportation.[14] 

The circuit court granted plaintiff’s motion to strike the defense of non-permissive use on the basis of it being untimely.[15] The court of appeals later affirmed, holding the statutory scheme set forth in Wisconsin Statute § 344.15 is mandatory in character, and therefore the doctrine of substantial compliance did not apply.[16] Midwest Mutual demonstrates the critical importance of fully complying with the 30-day notice requirement.

I.              What Form of Notice Must the Insurer Provide Within 30 days?

As alluded to in Midwest Mutual, and as further set forth in Wisconsin Statute § 344.15(4), an insurer “may correct the report or other notice only if it files with the secretary…an affidavit signed by the owner stating that the operator did not have the owner’s permission to operate the vehicle.”[17] Notably, “owner” includes a lessee pursuant to Wisconsin Statute § 344.01(2)(cm). 

Assuming an insurer is able to file a timely affidavit with the department, it should expect to receive a request that the owner or operator, or both, deposit security:

Upon receipt of notice from the insurer that an automobile liability policy or bond was in effect as to the owner only, the operator only or was not in effect as to either of them, the secretary shall within the remainder of the 90-day period specified in s. 344.13 (3) require the owner or operator or both, whichever is applicable, to deposit security pursuant to this chapter.[18]

However, an exemption from depositing security may be available if the owner or insurer provides uncontroverted proof that the vehicle was operated without actual or implied permission at the time of the accident. Acceptable proof includes: 

(a) Written notice from the law enforcement agency where the offense occurred stating that the motor vehicle was reported stolen prior to the accident or that the law enforcement agency investigated the report and found it to be a stolen motor vehicle.

(b) Written notice from a district attorney that the owner has filed a complaint against the operator and that the operator is being charged with operating without the owner’s consent or another crime indicating the operator’s involvement in the theft of the motor vehicle. 

(c) An affidavit signed by the operator stating that the motor vehicle was being operated without the owner’s expressed or implied consent is filed with the department. This paragraph does not apply to an owner who is the sponsor of the operator, under s. 343.15, Stats.[19]

Notably, while failure to correct an accident report within the 30-day period estops an insurer from asserting defenses relating to lack of permission, it does not estop an insurer from asserting other policy defenses.[20]

II.            Conclusion

Within thirty days from the date of receiving notice from the Department of Transportation, an insurer must correct the accident report or other notice by filing with the secretary an affidavit signed by the owner of the vehicle. The affidavit itself must state that the individual operating the automobile at the time of the accident did not have the owner’s permission to operate it. Failure to do so in a timely manner will bar the insurer’s ability to rely on the non-permissive use defense.

Author Biography: 

William A. Brookley is a partner with Cross Jenks Mercer & Maffei, LLP in Baraboo, Wisconsin. He concentrates his practice on civil defense litigation, both defending insureds on the merits of claims and representing insurers regarding coverage issues.