Category: Courts of Appeals

Western National Mutual Insurance Co. v. Advanced Disposal Services Solid Waste Midwest, LLC (Jury Verdict on Damages)

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In Western National Mutual Insurance Co. v. Advanced Disposal Services Solid Waste Midwest, LLC (2018AP2213), the Court of Appeals District IV upheld a jury’s award of $25,000 in damages to American Wood Recycling for a trailer damaged by American Disposal.

American Wood alleged that American Disposal negligently overloaded one of American Wood’s trailers, which resulted in a $50,289 invoice for the total cost of repairs. At trial, the jury found that $25,000 would fully compensate American Wood for damage to its trailer. American Wood appealed that verdict.

The court of appeals upheld the jury verdict, finding that there was evidence to support the jury’s damages award. At trial, American Wood and American Disposal disputed how much of the repairs were pre-existing damage and what were new damages due to American Disposal’s negligent overloading. Although the total cost of both pre-existing and new damages repairs was $50,289, the court found sufficient evidence to support the jury’s finding that $25,000 was sufficient for repairs of the new damage from American Disposal’s negligent overloading.  

William Sesing Construction, Inc. v. American Bank (Liability for Embezzlement)

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In William Sesing Construction, Inc. v. American Bank (2018AP1126), the Court of Appeals District II held that American Bank did not breach its contract nor was it negligent when a Sesing employee embezzled funds from an American Bank account.

Sesing hired Denise Heffner as its bookkeeper. In 2013, Sesing discovered that Heffner was embezzling money by writing to herself blank checks that had been signed by authorized Sesing signatories. Sesing also alleged that Heffner transferred funds without authorization from the Sesing money market account to its checking account, both held by American Bank. Sesing filed this lawsuit against American Bank, claiming breach of contract and negligence and seeking to recoup funds transferred by Heffner from the money market to the checking account.  

Citing the 2019 Wisconsin Supreme Court decision in Koss Corp. v. Park Bank, American Bank argued that Heffner was a fiduciary under Wisconsin’s Uniform Fiduciaries Act (UFA) (Wis. Stat. § 112.01), and Sesing failed to show that American Bank acted in bad faith according to the UFA. Sesing disputed whether Heffner was a fiduciary, but the court found that American Bank was not negligent regardless of the UFA’s applicability.

Instead, the court found that Sesing failed to provide evidence that American Bank breached any of its duties when it permitted Heffner to transfer funds between the two Sesing accounts. The court found that American Bank acted in accordance with the agreed upon security protocols regarding transfers. American Bank could not have known Heffner was impersonating an authorized Sesing employee when she made the unauthorized transfers. American Bank also provided monthly statements to Sesing, which could have alerted Sesing to any irregular activity.

Finally, the court found American Bank could not be negligent because Heffner’s transfers of funds from the money market to the checking account were not the proximate cause of Sesing’s loss. When the money was transferred to the checking account, it was still in Sesing’s control. Heffner’s removal of money from the checking account, not the transfer of funds between accounts, led to Sesing’s losses.

Payette v. Marx (Prejudgment Interest)

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*Case recommended for publication.

 

In Payette v. Marx (2018AP627), the Court of Appeals District III held that insurers do not owe prejudgment damages under Wis. Stat. § 628.46 when a third party demands general damages and the insurer is not certain it actually owes the demanded sum.

Defendant David Marx struck and killed plaintiff Payette while Payette was biking on a county highway. Marx had a $500,000 automobile insurance policy with SECURA and $1 million in additional coverage with 1st Auto.

Payette’s estate estimated damages related to the accident at $3.5 million to $5 million and sent 1st Auto a demand package seeking the full $1 million policy limit. The demand package listed:

  • $7,806.42 in medical and funeral expenses,
  • $1,988,779 in future damages, and
  • an unspecified amount of damages for Payette’s conscious pain and suffering.

When 1st Auto declined to comply with the demand package, the Estate filed this lawsuit against 1st Auto. The jury awarded the Estate a total of $672,806.42 in damages. SECURA had already paid the Estate its $500,000 policy limit, leaving 1st Auto owing $172,806.42.

Before the appeals court in this case was the question of whether 1st Auto owed prejudgment interest on that amount under § 628.46. Section 628.46 requires insurers to pay interest on overdue insurance claims. (Note that this case occurred before 2017 Act 235 decreased the interest rate on overdue claims from 12 percent to 7 percent.)  Previous case law (Kontowicz v. American Standard Insurance Co., 2006 WI 48) holds that prejudgment interest is due when:

  1. There is no question of the insured’s liability.
  2. There is a sum certain amount of damages.
  3. Written notice is provided to the insurer.

At issue here was the second condition.

1st Auto argued that the Estate’s demands for damages for conscious pain and suffering and pecuniary losses of Payette’s children were general damages that were not sum certain. The court agreed with 1st Auto that those general damages requested by the Estate did not satisfy the sum certain condition. Therefore, the Estate was not entitled to § 628.46 prejudgment damages.

The court declined to go as far as to say that general damages can never satisfy the sum certain condition, but in this case Payette’s conscious pain and suffering was unknown and Payette’s children needed to prove their pecuniary loss before it was owed by 1st Auto.

Overall, the court found that third parties are not entitled to § 628.46 prejudgment damages when an insurer is overdue on a claim of general damages that the insurer is not certain it actually owes.

The Wisconsin Insurance Alliance and Wisconsin Association for Justice filed amicus briefs in this case.

Wargaski v. NCI Group, Inc. (Warranty Forum Selection Clause)

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In Wargaski v. NCI Group, Inc. (2018AP2014), the Court of Appeals District III found that a warranty’s forum selection clause applied, barring the Wisconsin lawsuit.

Robert Wargaski alleged breach of warranty when NCI Group, Inc. rejected his warranty claim for faded paint on roofing panels Wargaski had purchased. The warranty contained a forum selection clause designating Texas as the venue for any disagreements over the warranty.

NCI sought to dismiss Wargaski’s lawsuit, arguing the case had been filed in the wrong jurisdiction according to the forum selection clause. Wargaski argued the warranty’s forum selection clause was unenforceable because it was procedurally and substantially unconscionable.

The court sided with NCI and dismissed Wargaski’s lawsuit. The forum selection clause was not procedurally unconscionable because the warranty had been conveyed to Wargaski when it was placed in the box of roofing panels he purchased, in accordance with 16 C.F.R. § 700.11(b). The forum selection clause was not substantially unconscionable because NCI’s principal place of business is Texas. The court found that general federal law allowing warranty suits to be filed in “any court of competent jurisdiction in any State” (15 U.S.C. § 2310(d)(1)(A)) did not preclude the more specific forum selection clause in the warranty.

Christus Lutheran Church of Appleton v. DOT (Condemnation of Property)

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In Christus Lutheran Church of Appleton v. DOT (2018AP1114), the Court of Appeals District III held that when the Department of Transportation (DOT) independently decides to include additional items of compensation in a jurisdictional offer for property condemnation, DOT must obtain a new appraisal supporting the new items in the offer.

DOT sought to take several acres of Christus Lutheran’s land to expand a state highway. DOT provided Christus Lutheran with an initial offer of $133,400 for the land, supported by an appraisal. The appraisal considered but did not include severance damages, which cover the loss of value to the remaining property after the taking.

After Christus Lutheran did not accept the offer, DOT sent a revised offer of $403,000, which did include $159,574 in severance damages. Christus Lutheran did not accept the revised offer and advised DOT to proceed with the acquisition by eminent domain. 

Finally, DOT provided Christus Lutheran with a jurisdictional offer similar to the revised offer, and the property was transferred to DOT. Christus Lutheran filed this lawsuit seeking to void the offer and prohibit the acquisition because DOT failed to provide an appraisal supporting the jurisdictional offer.

2017 Wisconsin Court of Appeals case Otterstatter v. City of Watertown found, based on Wis. Stat. § 32.05(2)(b) and (3)(e), that an appraisal must be a “supporting part or fundamental ingredient of the jurisdictional offer.” In this case, the court found in favor of Christus Lutheran that the initial appraisal did not support the offer because the initial appraisal did not include the severance damages. Because DOT decided to include the severance damages independently of an appraisal, DOT violated the statutory requirements and intent that the state provide the property owner with a transparent, narrative appraisal of the taking.

Thus the court found that DOT must obtain a new appraisal in jurisdictional offers where it believes additional compensation beyond the bounds of the initial appraisal is warranted.

Hughes v. Allstate Indemnity Co. (Coverage Exclusion)

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In Hughes v. Allstate Indemnity Co. (2019AP1234), the Court of Appeals District IV held that homeowner’s insurance policy exclusions precluded coverage for water damage to the plaintiff’s basement.

Hughes’s basement sustained water damage after someone turned on a spigot and left it running without Hughes’s knowledge or permission. Hughes filed this lawsuit seeking coverage from his Allstate insurance policy for the damage.

The Allstate policy covered damage to Hughes’s home, with some exceptions. The policy specifically excluded coverage for water damage. The policy also provided no coverage for instances where there are two or more causes of loss to the property and the predominant cause of the loss is excluded.

The court agreed with Allstate that these two provisions precluded coverage for the water damage to Hughes’s home. The court found that the water itself, not the act of turning on the spigot, was the predominant cause of the loss. Because water damage was excluded from the policy, the policy did not provide coverage in this case.

Haynes v. LIRC (Discrimination Claim)

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In Haynes v. LIRC (2018AP1581), the Court of Appeals District IV upheld a Labor & Industry Review Commission (LIRC) decision dismissing a discrimination claim.

Plaintiff Sharon Haynes filed this claim alleging race and sex discrimination against Blain’s Farm & Fleet. Haynes claimed that Blain’s technicians intentionally failed to secure a tire on her vehicle and intended to cause her harm because she is an African-American woman.

LIRC found there was no evidence of race-based or gender-based discrimination. The court upheld LIRC’s decision.

The court found substantial evidence supporting LIRC’s determination that the technicians were not aware of Haynes’s race or gender and that the technicians had no race-based or gender-based discriminatory animus.

The court also upheld LIRC’s decision denying Haynes’s motion to present new video evidence, finding that the proposed new video clip would not have changed LIRC’s determination that no discrimination occurred.

Finally, the court rejected Haynes’s argument that the LIRC commissioners should have recused themselves due to bias.

Superior Water, Light & Power Co. v. London Market Insurers (Environmental Contamination Coverage)

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In Superior Water, Light & Power Co. v. London Market Insurers (2018AP1926), the Court of Appeals District III found that an insurance policy’s provision on coverage for environmental contamination was ambiguous.

Several insurance companies (referred to by the court as London Market Insurers, or LMI) issued excess liability policies to Superior Water in 1970. In 2001, the Wisconsin Department of Natural Resources claimed that Superior Water was liable for cleanup of chemicals contaminating groundwater surrounding Superior Water’s site. In this lawsuit, Superior Water argues that the 1970 policies obligated the insurers to cover those cleanup costs.

The policy in question covered any “occurrence” of damage or destruction to third-party property, with “occurrence” defined as “one happening or series of happenings arising out of or caused by one event taking place during the term of this contract.” Superior Water and the insurers disputed whether the continuous exposure of groundwater to chemicals from the Superior Water site was an “event” that occurred under the policy period. Superior Water said the exposure of different groundwater to the chemicals was a new “event.” The insurers said an “event” would be a new release or spill that caused the contamination. According to the insurers, without a new release during the policy period, the contamination would not be covered.

The court found that the policy language was ambiguous. The court’s custom is to interpret ambiguous policy language against the contract drafter. In this case, it was unclear which party drafted the policy, so the court remanded for further proceedings.

Eagle Cove Camp & Conference Center, Inc. v. County of Oneida (Zoning)

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In Eagle Cove Camp & Conference Center, Inc. v. County of Oneida (2018AP940), the Court of Appeals District III held that claim preclusion barred most of the plaintiff’s claims against the County and the Town of Woodboro, and the court awarded the Town damages because the action was frivolous.

Eagle Cove sought a conditional use permit to build a Bible camp in Woodboro on property currently zoned as residential. The County accepted the Town’s recommendation to deny Eagle Cove’s conditional use permit application. (The Town itself did not have jurisdiction over the zoning of the property.)

Eagle Cove subsequently filed an action in federal court against the County and Town, claiming violation of the Religious Land Use & Institutionalized Persons Act, Americans with Disabilities Act, Rehabilitation Act, as well as Equal Protection Clause and First Amendment violations. Eagle Cove also alleged violations of the right to freedom to worship under the Wisconsin state constitution and sought certiorari review by the federal court of the County’s decision.

The federal court dismissed Eagle Cove’s federal claims because Eagle Cove failed to meet the burden of proof for any of the claims. The federal court also dismissed Eagle Cover’s state constitutional claims with prejudice. However, the federal court dismissed the certiorari claim without prejudice.

Eagle Cove later filed the instant lawsuit in state court, seeking not only the certiorari claim that the federal court had allowed to proceed, but also fifteen additional state constitutional claims. The County and Town argued that claim preclusion barred the fifteen new claims.

The state appeals court agreed that claim preclusion barred the fifteen additional claims. The claims met the three required elements of claim preclusion:

  1. Identity of parties. It was undisputed that Eagle Cove and the County and Town were the same parties in both the federal and state lawsuit.
  2. Final judgment. The court rejected Eagle Cove’s argument that claim preclusion did not apply because the federal district court did not dispose of the entire case. The court also rejected the argument that the federal and state actions are one “case,” making claim preclusion inapplicable.
  3. Identity of causes of action. Eagle Cove’s federal and state causes of action arise from the same set of facts. Furthermore, both the federal and state actions bring claims of violations of the Wisconsin Constitution Art. I § 18, religious liberty claims, and equal protection claims.

The state appeals court further agreed with federal courts that new case law did not permit Eagle Cove to reopen the federal judgment.

Finally, the court found that Eagle Cove’s inclusion of the Town in this action was frivolous because all the claims against the town were precluded. The Town was not part of the certiorari claim because the County, not the Town, had jurisdiction of Eagle Cove’s conditional use permit application. Therefore, Eagle Cove’s inclusion of the Town in this lawsuit was frivolous, and the court awarded damages to the Town accordingly.

After this court of appeals decision, the only claim left for Eagle Cove to litigate is its certiorari claim against the County.

Warrington v. City of Prairie du Chien (Recreational Immunity)

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In Warrington v. City of Prairie du Chien (2019AP95), the Court of Appeals District IV held that recreational immunity applied, barring parents’ claim that the city was negligent in their son’s drowning during a swim lesson.

The Warringtons’ son died after drowning at the City of Prairie du Chien pool during a swim lesson run by city and school district staff. The Warringtons filed this lawsuit against the city and school district alleging negligence.

The court of appeals dismissed the Warringtons’ claims under Wisconsin’s recreational immunity statute (Wis. Stat. § 895.52(2)(b)), which provides immunity for owners from liability for death or injury of persons engaging in recreational activity on the owner’s property. The statute includes instruction in a recreational activity in the definition of “recreational activity.”

The court rejected the Warringtons’ argument that their son was not engaging in a “recreational activity.” The Warringtons argued their son was not swimming when he was injured because he had been designated as a “non-swimmer” for the purposes of the swimming lesson. Further, they argued their son was not receiving swimming instruction because the pool staff had lost track of him when he drowned. The court said such a narrow construction of the recreational immunity statute as proposed by the Warringtons would counter the legislature’s directive to liberally construe the recreational immunity law in favor of property owners. Therefore, the court upheld recreational immunity in favor of the city.