In an opinion authored by Chief Judge Lisa Neubauer and joined by Judge Brian Hagedorn (both Wisconsin Supreme Court candidates), the Court of Appeals District II held in Choinsky v. Germantown School District (2018AP116) that insurers did not breach their duty to defend when they did not immediately accept the defense of their insured. Furthermore, the insurers did not owe unpaid fees beyond what was agreed upon between the insurers and the attorneys.

 

Facts

The underlying issue in this case involved a group of retired teachers who filed a lawsuit against their school district for breach of contract following the enactment of 2011 Act 10. The district tendered its defense to its insurers, Employers Insurance Company of Wausau and Wausau Business Insurance Company.

The insurers determined there was no coverage and, according to the coverage dispute procedure recommended by Wisconsin courts, moved to 1) intervene, 2) bifurcate the coverage issue from the underlying merits of the case, and 3) stay the merits case until the resolution of the coverage issue. The court agreed to bifurcate the issues but denied the motion to stay, citing the need for urgency in resolving the underlying employee benefits issue. The insurers agreed to meanwhile provide defense to the district on the merits case – including retroactive fees – until the court decided the coverage issue.

Before the court decided on the insurers’ motion to intervene, the school district moved to dismiss the teachers’ merits case. There was relatively little other activity on the merits case between when the district filed its motion to dismiss and when the court issued its decision to bifurcate but not stay the merits case.

 

Attorney Fees in Establishing Coverage

The district contended that, because the insurers did not immediately accept its defense and instead waited until the court decision on the bifurcation and stay, the insurers owed the district attorney fees for the coverage dispute. Elliot v. Donahue required an insurer to pay attorney fees for establishing coverage when the insurers denied defense to an insured and moved to bifurcate but not stay the merits proceedings. In the instant case, the appeals court ruled that Elliot did not apply here because the insurers timely and properly followed the court-approved coverage issue procedures. Even though there was no stay granted, the insurer properly filed the motion to stay and timely decided to defend the district when the stay was denied. The court furthermore ruled that waiting to defend until the circuit court decided on the coverage dispute was not a breach of the insurers’ duty to defend.

 

Unpaid Fees on the Merits Case

The district also contended that the insurers failed to reimburse the district fully for attorney fees in the merits case. The insurers had made deductions to invoices, citing the attorneys’ violations of guidelines the attorneys and insurers had agreed upon when they worked together in previous cases. The attorneys did not dispute the insurers’ deductions. The district claimed reimbursing them for the deducted amount instead of the full invoice amount was a breach of contract and requested reimbursement of $50,000 in unpaid fees. The court rejected the district’s argument, stating that there was no evidence the unpaid fees were reasonable and owing, since the attorneys and insurers had agreed upon them.

In Town of Little Wolf v. Waupaca County (2017AP1941), the Court of Appeals District IV upheld Waupaca County’s decision that a mine was a lawful nonconforming use after the passage of a non-metallic mining ordinance.

In 2015, Waupaca County passed the non-metallic mining ordinance, which requires new and expanding mines to obtain conditional use permits. The Waupaca County Planning and Zoning Committee determined that the Theil Pit mine was a lawful nonconforming use. Accordingly, the Theil Pit operators did not need to obtain a conditional use permit since the mine operated prior to the passage of the ordinance.

The Town of Little Wolf appealed the Zoning Committee’s decision, arguing that the Thiel Pit was not a lawful nonconforming use because its operators had failed to comply with a previous ordinance requiring them to obtain a reclamation permit. However, the court ruled that, whether the Thiel Pit was in violation of the reclamation ordinance or not, the mine was still operating legally in regard to zoning laws. The court stated that noncompliance with a regulatory, non-zoning ordinance like the reclamation ordinance does not prohibit the mine from continuing to be zoned as a lawful nonconforming use.

The court also rejected the town’s arguments that Waupaca should have considered whether the Thiel Pit was a public nuisance, that the appeal process violated the town’s due process rights, and that there was a conflict of interest related to a Waupaca attorney.

In Bakkestuen v. Lepke Holdings LLC (2017AP2500), the Court of Appeals District IV held that employer Lepke owed dump truck drivers compensation for preparation time before and after actual loading time.

Citing the 2016 Wisconsin Supreme Court decision United Food & Com. Workers Union v. Hormel Foods Corp., which held that donning and doffing of required clothing was compensable work time, the appeals court ruled in this case that preparing trucks before and after loading was similarly compensable. The court stated that the preparation time was “integral and indispensable” to the drivers’ primary loading activity.

The court rejected Lepke’s argument that it did not owe the drivers the unpaid wages because it paid them more than the minimum wage for the primary hours worked. Citing the recent Tetra Tech v. DOR decision, the court did not, as Lepke requested, accord great weight deference to a prior Department of Workforce Development (DWD) decision, which stated that employers are required to pay employees only so that the total amount paid during a pay period divided by the total number of hours worked is at least the statutory minimum wage. Instead, the court held that DWD rules (Wis. Admin. Code §§ DWD 272.025 and 272.12(1)) require Lepke to pay employees the agreed-upon wage for all hours worked.

Finally, the court held that Lepke was required to pay the drivers overtime. Although the motor carrier exemption to federal and state overtime laws applied, Lepke owed the employees overtime because Lepke had contractually agreed to pay them overtime. Furthermore, Lepke owed the drivers the higher prevailing wage for overtime work they did on municipal and state works projects, according to the now repealed prevailing wage statute (2013-14 Wis. Stat. §§ 103.49 and 103.50).

In Langenhahn v. West Bend Mutual Insurance Co. (2017AP2178), the Court of Appeals District III held that recreational immunity applied when a pedestrian was injured leaving a community event.

Paula Langenhahn tripped on a barricade while walking to her vehicle from the community event Marathon Fun Days. The barricade was placed to close off a street for the event, which was organized by the American Legion Post 469. Langenhahn filed this negligence action against Post 469, but the circuit court dismissed the claim on the grounds of Wisconsin’s recreational immunity statute Wis. Stat. § 895.52.

The appeals court upheld the dismissal of the claim, restating that recreational immunity applied to Post 469. Relying on the case Roberts v. T.H.E. Insurance Co., which said the organizer of an event is an immune “owner” and “occupier” of property under Wis. Stat. § 895.52, the court determined that Post 469 was also an immune “owner” because it was occupying the park area as the organizer of the Marathon Fun Days event. Furthermore, the court determined that Langenhan walking back from the event was inextricably connected to the recreational activity of attending the event, so she was “engag[ing] in a recreational activity” for the purposes of Wis. Stat. § 895.52(2).

In Manthe v. DOT (2017AP1598), the Court of Appeals District IV held that Wisconsin’s freeway statute (Wis. Stat. § 84.295(3)) does not violate equal protection rights and denied damages to a property owner following the condemnation of his property by the state Department of Transportation (DOT).

Manthe’s property is located on either side of Highway 51. When DOT expanded Highway 51 from two to four lanes, Manthe lost the ability to cross the highway at a single location, and thus the route between his two parcels of property increased by two miles. Manthe argued he should be compensated for the increased travel time.

 

Designation of Highway 51 as Freeway

First, Manthe requested a writ of mandamus compelling DOT to designate Highway 51 (currently a controlled access highway) as a freeway. Wisconsin statutes entitle to compensation only landowners with property abutting a freeway. The court declined to require the designation of Highway 51 as a freeway because Wis. Stat. § 84.295(3) and related statutes give DOT the discretion, not a requirement, to designate freeways.

 

Equal Protection Challenge

Manthe’s equal protection challenge to Wis. Stat. § 84.295(3) argued that the statute creates two distinct groups: 1) landowners with property abutting a freeway and 2) landowners with property abutting a controlled access highway. Manthe contended that these two groups are similarly situated because Wis. Stat. § 84.295(3) allows DOT to designate identically constructed roadways as either a freeway or a controlled access highway. The groups are then given unequal treatment under the law because only landowners abutting freeways are entitled to compensation.

However, the court agreed with DOT’s analysis of the constitutionality of the statute, stating that the two groups are not similarly situated because landowners abutting controlled access highways may still have driveway access to the highway. The court declined to analyze whether there is a rational basis for the unequal treatment of the two groups because they are not similarly situated.

 

Compensation for Loss of Time

The court denied Manthe’s request for damages for increased travel time between his two property parcels that are separated by Highway 51. The court relied on prior case law stating that only loss of direct access is compensable. In this case, Manthe’s property still had direct access to the highway.

Furthermore, the court said compensation for loss of time under Wis. Stat. § 32.09 is not applicable because DOT took only a small part of Manthe’s land, so there was no actual taking of property.