* This case is recommended for publication.

 

In Kemper Independence Insurance Co. v. Islami (2019AP488), the Court of Appeals District II agreed with an insurer that coverage was not due to an innocent insured when another insured on the policy committed fraud.

The Islamis were legally separated, though they still lived together. Ydbi Islami intentionally set fire to their home, which Ismet Islami legally owned. Ismet Islami sought coverage from her insurer Kemper for damages from the fire.

The court agreed with Kemper that there was no coverage because Ydbi had lied to Kemper about his actions. The Kemper policy barred coverage if an insured conceals or misrepresents a fact on which the insurer relies or which contributes to the loss.

The court rejected Ismet’s arguments that

• Coverage was not barred because Wisconsin statutes (Wis. Stat. § 631.95) prohibit denial of coverage to a domestic abuse victim based on acts of the abuser. Instead, the court found no evidence that the fire was the result of domestic abuse as defined in statute.
• Ydbi was not an insured under the Kemper policy because the Islamis were legally separated. Although they were legally separated, the court found Ydbi was still Ismet’s “spouse” covered under the insurance contract.
• Ismet was an “innocent insured,” so could not be denied coverage based on Ydbi’s fraud. Instead, the court found the specific language of the fraud provision in the Kemper policy barred coverage for all insureds if one insured committed concealment or fraud. The policy lacked a severability clause to provide coverage to an innocent insured, so Ydbi’s fraud did bar coverage for Ismet.

 

The Wisconsin Supreme Court has issued a 4-3 decision in Legislature v. Palm, declaring the Department of Health Services’s (DHS) “Safer at Home” order unenforceable and immediately striking down the order. The court held that the Safer at Home order is a “rule” that was required to go through statutory rulemaking processes and that the order exceeds DHS’s authority under Wisconsin’s pandemic statutes.

Though the statewide order has been struck down, Dane County and Milwaukee have already announced they will continue to enforce shelter-in-place guidelines. This trend might continue with other cities or counties if they have their own health departments.

According to WisPolitics and the Wheeler Report, Gov. Evers told reporters on Wednesday evening that the administration will soon be releasing framework for an emergency rule to address the pandemic within the parameters of the court decision.

Chief Justice Roggensack, Justice R. Bradley, Justice Kelly, and Justice Ziegler joined in the majority opinion. Several justices also wrote concurrences expanding on the court’s reasoning. Justice Hagedorn, Justice Dallet, and Justice Walsh Bradley dissented.

 

Decision

After Gov. Evers and DHS-designee Andrea Palm extended Wisconsin’s Safer at Home Order to May 26 under Emergency Order #28, the Republican-led Legislature filed this lawsuit challenging DHS’s authority to issue such an order.

In its ruling on May 13, the Supreme Court agreed with the Legislature that:

1. The emergency order is a “rule” under Wisconsin’s administrative procedure law and should have gone through the statutory emergency rulemaking process, which allows for legislative oversight and public input.

Wis. Stat. § 227.01(13), defines a rule, in part, as a “general order of general application.” The court concluded that the Safer at Home order was a “general order of general application” because it regulates a class of all Wisconsinites and anyone else who enters the state. Therefore, because of its broad application, the order becomes a rule that must go through rulemaking requirements, including legislative oversight, in Ch. 227.

The court also held that DHS cannot create and enforce criminal penalties for violation of an order.

Addressing the unusual circumstances of the current pandemic, the court acknowledged that the governor has special emergency powers under § 323.10 to implement emergency measures. The 60 day emergency period declared by the governor would give DHS enough time to promulgate rules to address an emergency if necessary. In this case, Gov. Evers’s emergency declaration expired in mid-May, and DHS illegally sought to extend the Safer at Home measures beyond that date without rulemaking.

 

2. Even if the order does not violate Wisconsin rulemaking laws, the order exceeds DHS’s authority under Wis. Stat. § 252.02.

 The court found that authorities granted by statutes to address epidemics in Ch. 252 do not support the Safer at Home ban on all nonessential and the closure of all nonessential businesses. 2011 Act 21 prohibited state agencies from implementing standards that were not explicitly permitted by statute. The court found that in the Safer at Home order DHS went beyond the parameters for addressing epidemics that the legislature laid out in Ch. 252. While DHS can close things like schools and churches under Ch. 252, DHS does not have the authority to act as broadly as closing all businesses and banning travel. (The court notes that it is not invalidating the provision of the order that closes schools.)

 

The court declined to take up the Legislature’s argument that DHS acted arbitrarily and capriciously by failing to provide a reasoned basis for distinguishing between essential and nonessential businesses.

The Legislature had asked the Wisconsin Supreme Court for a temporary injunction of the Safer at Home order but with several days of lead time for DHS to promulgate an emergency rule to lawfully enforce the order. However, the court decided to enjoin the emergency order immediately, as DHS and the Legislature have had more than two weeks since the lawsuit was filed to begin working on an administrative rule.

 

Concurring Opinions

In a concurring opinion, Chief Justice Roggensack would have stayed the invalidation of the order to May 20 to give the Legislature and administration time to come to an agreement on a valid way to address the pandemic.

In a second concurring opinion, Justice R. Bradley (joined by Justice Kelly) said the DHS Safer at Home order violated constitutional separation of powers because it allowed Secretary Palm to both make the law and execute it. Bradley opined that it is a crucial role of the judiciary to uphold the constitution especially in times of emergency like a pandemic.

In a third concurring opinion, Justice Kelly (joined by Justice R. Bradley) invoked the nondelegation doctrine, which holds that one branch of government cannot delegate its core authority to another branch. In this case, Kelly argued that DHS’s reading of its authority under § 252.02 encroaches on legislative powers. The legislature cannot confer authority to the executive for such far-reaching actions as limiting private gatherings, closing businesses, and banning travel under the vague language in the statutes.

 

Dissents

In a dissent, Justice Walsh Bradley (joined by Justice Dallet) expressed concern at the confusion created by Chief Justice Roggensack’s writing the majority opinion immediately invalidating the Safer at Home order but also writing separately that she would have stayed the enforcement of the decision. Walsh Bradley would have stayed the decision, given the public health consequences of leaving no regulations related to COVID-19 in place.

In a second dissent, Justice Dallet (joined by Justice Walsh Bradley) would have upheld the Safer at Home order because the plain language of Ch. 252 grants DHS broad authority to control communicable diseases. The dissent argues the order is not a rule subject to Ch. 227 because it applies only to immediate circumstances for a limited amount of time. The Dallet dissent further argued that the Legislature did not have standing to bring claims that DHS exceeded its authority under Ch. 252.

In a third dissent, Justice Brian Hagedorn (joined by Justices Walsh Bradley and Dallet) veered from his conservative colleagues on the bench and would have upheld the Safer at Home order. The dissent argued that the Safer at Home order was not a rule because it applied only to a specific factual circumstance and was not of “general application.” A statewide order like Safer at Home would have to have prospective application to different circumstances to be deemed a rule. Here, the Safer at Home order was a ”general order” because it applied to the whole state but was not of “general application” because it addressed only COVID-19 and applied for a limited time (until May 26).

Similar to the Dallet dissent, Hagedorn also argued the Legislature did not have standing to bring claims that DHS exceeded its authority under Ch. 252. The Legislature itself was not injured by and therefore cannot challenge executive enforcement of that statute.

Hagedorn also took issue with the court’s writings on the nondelegation doctrine in this context and on the unenforceability of criminal penalties in DHS orders.

In Brenner v. National Casualty Co. (2018AP2252), the Court of Appeals District I held that Amerisure’s policy was in excess to the primary National Casualty policy covering the Milwaukee World Festival, where an injury to a contractor occurred.

National insured the Milwaukee World Festival. Amerisure insured Hunzinger Construction Co., which was contracting with Milwaukee World Festival, and the Amerisure policy included Milwaukee World Festival as an additional insured.

When an employee of Hunzinger sustained an injury on the Milwaukee World Festival premises, he filed this personal injury suit against both National and Amerisure. At issue in this case was the extent of Amerisure’s coverage.

Brenner settled his claim for an amount less than National’s personal injury limits. National argued Amerisure should share the defense and indemnification costs because both National and Amerisure were primary insurers of the Milwaukee World Festival. Amerisure argued it was an excess insurer.

The court agreed that Amerisure was an excess insurer liable for coverage only beyond the National policy limit. The National policy provided that its coverage was primary except when other primary insurance is available. The Amerisure policy provided that its coverage was excess unless a written contract requires it to be primary. Since no such contract existed, the Amerisure policy was excess coverage. Therefore, no other primary insurance was available, so National’s coverage was primary.

In Secura Insurance v. Super Products, LLC (2018AP1600), the Court of Appeals District II held that the economic loss doctrine bars recovery for damage to contracted property, even if there was injury to other property.

Wisconsin Utility Exposure purchased an excavator from Super Products. The excavator caused a fire that damaged the excavator itself and a variety of other items. Secura, Wisconsin Utility Exposure’s insurer, paid for the damages to its insured then filed the instant negligence lawsuit against Super Products. Super Products sought to dismiss the claims under the economic loss doctrine.

The economic loss doctrine typically bars lawsuits seeking to recover solely economic losses arising from the nonperformance of a contract, in this case the defective purchased product. Damages to “other property,” in this case the variety of other items damaged in the fire, are exempt from the economic loss doctrine and can be recovered. Secura argued the economic loss doctrine did not apply because the damage to the other property allows for recovery for the defective product.

The court rejected Secura’s reading of previous case law and held that the economic loss doctrine barred Secura’s claims for recovery of damages to the excavator. Secura could recover damages for injury to the other property, but that exempt claim did not open damages to the contracted property for recovery.

In its last oral arguments of the 2018-19 term, the Wisconsin Supreme Court heard a case that will decide whether the Legislature constitutionally convened the December 2018 extraordinary session. The issue in League of Women Voters v. Evers is whether extraordinary sessions are “provided by law” as required by Wisconsin Constitution Art. IV § 11.

Counsel for the defendant Legislature Misha Tseytlin argued that the Legislature did not violate the Wisconsin Constitution by meeting in December. Citing State ex rel. Sullivan v. Damman (1936) and State ex rel. Thompson v. Gibson (1964), the Legislature said that while each chamber recessed in March 2018 the legislature did not finally dissolve itself and end the biennial session until January 2019. The biennial session continued after March 2018 as a committee period, and in December 2018 the Legislature converted the committee period to a floor period pursuant to 2017 Senate Joint Resolution 1. Wis. Stat. § 13.02(3) authorizes the legislature to develop a work schedule such as SJR 1.

Justice Kelly seemed to agree with the Legislature’s argument, emphasizing the logic that Wis. Const. Art. IV § 11 requires the Legislature to meet “as provided by law” and that law is Wis. Stat. § 13.02(3), which then allows the Legislature to create its own work schedule by joint resolution. If the court finds the Legislature met according to SJR 1, the Legislature met constitutionally.

Justices Dallet and Walsh Bradley voiced concerns with the Legislature’s argument, questioning how an “extraordinary session” can be part of a “regular session.” Tseytlin responded that the December 2018 floor period was constitutional whether the Legislature called it an “extraordinary session” or simply a non-prescheduled floor period within the regular session.

(Defendants’ brief)

The plaintiffs’ arguments began with Justice R. Bradley questioning how the decades-old practice of the Legislature holding extraordinary sessions can just now be found unconstitutional. Counsel for the plaintiff League of Women Voters Jeffery Mandell argued that no Wisconsin law provides for extraordinary sessions. Justice Kelly questioned whether regularly scheduled floor periods would also be unconstitutional since they are not found explicitly in the statutes. Overall, the plaintiffs seek to invalidate the extraordinary session laws because § 13.02 did not “provide by law” for the December 2018 extraordinary session in accordance with Wis. Const. Art. IV § 11.

(Plaintiffs’ brief)

While it can be difficult to predict how the court will decide based on the line of questioning by the justices, it is likely the court will narrowly rule in favor of the Legislature.

League of Women Voters is the first of several cases challenging the extraordinary session to be heard by the Wisconsin Supreme Court. Read about other extraordinary session litigation here.