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Houlton mom can sue Allstate over daughter's death

MADISON - A Houlton mother can sue the insurer of her daughter's stepmother after her daughter drowned in a bathtub when left unattended by the stepmother, the Wisconsin Supreme Court ruled Friday.

In a 4-3 vote, the court overturned an appeals decision and returned the case to St. Croix County Circuit Judge Edward Vlack who had found that Wendy Day's wrongful death lawsuit was covered under the $300,000 policy Allstate Insurance had issued Day's ex-husband, Clinton Day and his wife, Holly, of Hudson.

The state Supreme Court found that the appeals court erred in applying a clause in Day's policy, which excludes injury coverage to an insured person who could receive benefit from the policy. The District 3 Court of Appeals had dismissed the suit finding that Clinton Day would be entitled to recovery of half the proceeds his ex-wife could receive as a surviving parent.

"The court of appeals' assertion that Clinton would have a legal right to collect a portion of the wrongful death award fails to distinguish the right to pursue a claim under the wrongful death statute from the ownership of a wrongful death recovery when the parties are divorced," Justice Ann Walsh Bradley wrote in the 35-page opinion.

The insurance coverage dispute results from Emma Day's drowning on Nov. 27, 2006, while taking a bath in the home of her father and stepmother. Clinton and Wendy Day had divorced in 2004 and shared joint custody of Emma and her two sisters. Clinton married Holly and she became stepmother to the three girls.

Emma had epilepsy and suffered two seizures at school earlier on the day she died. On that evening Holly prepared Emma's bath and allegedly left her unattended in the tub with the bathroom door closed. Emma drowned as a result of having a seizure in the bathtub, according to the decision.

Wendy Day brought suit against the four Days and Allstate which had issued Holly and Clinton Day a homeowner's policy. Holly, Clinton and the two children were dismissed from the suit and Wendy proceeded against Allstate.

Vlack stayed ruling on the merits of the case and found there was coverage for Wendy Day under the policy. Allstate appealed and prevailed with the appeals court finding that the policy had no survivor benefits which would be shared by Clinton and insured party in the policy.

In arguing the case before the state Supreme Court Allstate's attorney John Swietlik warned of possible collusion between Wendy Day and the other Days against Allstate if the court considered the policy covered Clinton Day.

The court's majority found that Allstate's policy failed to define "benefit" and including the obligation to defend Holly in the suit and Clinton's right to receive any proceeds from it. The policy also ignores the state's wrongful death statute that allows Emma's heirs to bring suit which includes Wendy and Clinton and requires that their claims be joined in a single suit.

The majority opinion also points out that although both Wendy and Clinton can bring suit, state law doesn't simply divide the suit's proceeds based on a biological relationship between the parties.

"Instead, each wrongful death beneficiary's recovery may be an individualized amount that is based on a beneficiary's actual loss, Bradley wrote.

The court ordered the case returned to Vlack for further proceedings.

In a dissent Justice Annette Ziegler wrote that the majority "authors a recipe for collusion, inviting insureds to manipulate intra-family claims so as to obtain liability coverage where it otherwise would be excluded."

While stating she is sympathetic to the Day family, the court is exposing Allstate to a risk it didn't contemplate and for which it didn't receive a premium. Justices David Prosser and Michael Gableman joined Ziegler in dissent.

Allstate's attorney John Swietlik said Friday afternoon that he hadn't read the decision and had no comment except that he hadn't expected to lose.

Wendy Day's attorney Martha Heidt was unavailable for comment.