The Wisconsin Supreme Court has released its calendar of oral arguments for February 2019. There will be several notable cases argued this month, addressing issues including medical malpractice, crime insurance, governmental immunity, and the federal Communications Decency Act.

Cases of interest include:

 

Leicht Transfer & Storage Co. v. Pallet Central Enterprises, Inc. (Crime Insurance Coverage)
Feb. 1

The issue before the court is whether amounts paid in response to forged invoices are covered losses under a crime insurance policy that covers forged checks.

The underlying claim in the case arose when Pallet Central forged invoices to Leicht. Leicht paid $505,000 in response to the forged invoices. When Leicht discovered the invoices were for pallets it had never ordered or received, it filed a claim for its losses to its insurer, Hiscox Insurance Company, under its forgery coverage policy.

The lower courts ruled that there was no coverage for the forged invoices because the policy covered only forged checks, and invoices themselves cannot be exchanged for money. Leicht argues that forged invoices should be considered a “direction to pay” under the covered losses in the Hiscox policy.

 

David Paynter v. ProAssurance Wisconsin Insurance Co. (Medical Malpractice)
Feb. 1

The issue before the court is whether an injury sustained in both Wisconsin and another state is a “foreign cause of action” under Wisconsin’s statute applying foreign statutes of limitation (Wis. Stat. § 893.07).

The underlying claim in the case arose when Dr. James Hamp, who operates offices in both Wisconsin and Michigan, misdiagnosed a growth on patient David Paynter, a Michigan resident. Paynter first saw Dr. Hamp in his Michigan office, but Dr. Hamp called Paynter with the misdiagnosis from his Wisconsin office. Paynter sued Dr. Hamp and both his Michigan and Wisconsin malpractice insurance policies.

The Supreme Court will decide whether Paynter’s injury arising in multiple states is a “foreign cause of action” under Wis. Stat. § 893.07, thus barring the claim under Michigan’s statute of limitations.

 

Security Finance v. Brian Kirsch (Wisconsin Consumer Act)
Feb. 1

The issue before the court is whether a consumer sued without first receiving a notice of right to cure default may sue a merchant for damages under the Wisconsin Consumer Act.

The underlying claim in this case arose when Security Finance sued Brian Kirsch for a default on a loan. Kirsch counterclaimed that Security Finance’s complaint failed to give him proper notice of right to cure the default. Security Finance ultimately voluntarily dismissed the case, but Kirsch wanted to maintain his counterclaims.

The Supreme Court will decide whether Kirsch can sue for damages under Ch. 427 of the Wisconsin Consumer Act because Security Finance failed to give proper notice of right to cure.

 

Alan Pinter v. Village of Stetsonville (Governmental Immunity)
Feb. 11

The issues before the court are 1) whether a village’s oral policy constitutes a ministerial duty, exempting it from governmental immunity protections and 2) whether expert testimony is required to prove a private nuisance.

The underlying claim in the case arose when the Village of Stetsonville failed to abide by its oral policy regarding removing excess wastewater during heavy rains. As a result, waste and sewage were deposited in Alan Pinter’s basement. Pinter filed the instant lawsuit, claiming negligence and private nuisance. The village argued it was protected under governmental immunity (Wis. Stat. § 891.80(4)).

Pinter argues that by not following the village’s oral policy, the village failed to perform a ministerial duty, exempting it from governmental immunity. The lower courts rejected Pinter’s argument and further dismissed Pinter’s claim for private nuisance because he failed to offer expert testimony.

 

Yasmeen Daniel v. Armslist, LLC (Communications Decency Act Liability)
Feb. 14

The issue before the court is whether the federal Communications Decency Act (CDA) allows a website to be held liable under Wisconsin law for publishing a third-party’s information.

The underlying claim is against Armslist.com, which connects arms buyers and sellers with each other. Radcliffe Haughton, who had been legally prohibited from gun ownership, obtained a gun via Armslist and used it to kill four people. The daughter of one of the victims filed several tort claims against Armslist based on the CDA.

The Supreme Court will decide whether Armslist is immune under the CDA because it only passively displays third-party sellers’ information.

 

 

In Steadfast Insurance Co. v. Greenwich Insurance Co. (2019 WI 6), the Wisconsin Supreme Court said a previous insurer had a duty to defend Milwaukee Metropolitan Sewerage District (MMSD) for losses related to a rain event that occurred when MMSD had coverage with a subsequent insurer.

MMSD contracted with private companies to operate and maintain its sewerage system. Greenwich Insurance Co. insured United Water, which operated the system until February 29, 2008. Steadfast Insurance Co. insured Veolia, which subsequently operated the system. The rain event at issue here occurred in June 2008, when Steadfast was insuring Veolia and MMSD. However, it was alleged that United Water’s previous management was a cause of the June 2008 damage to the system. No damages were awarded to plaintiffs, but MMSD sought coverage for its defense costs in lawsuits resulting from the rain event. Steadfast paid $1.55 million for MMSD’s defense costs. Greenwich denied coverage to MMSD.

The court held that both the Steadfast policy and the Greenwich policy were primary and successive insurers of MMSD. Since the policies were not concurrent and they primarily insured two different entities (United Water and Veolia), Greenwich’s policy could not be an “other insurer” or excess insurer to the Steadfast coverage. Accordingly, the court held that Greenwich breached its duty to defend by erroneously determining it did not provide coverage for lawsuits arising from the June 2008 damage. The court emphasized that, in coverage disputes, insurers should move to bifurcate the coverage issue and stay the underlying liability issue to avoid risking a breach of duty to defend.

After determining Greenwich had a duty to defend, the court determined that Steadfast correctly brought a subrogation, not a contribution claim. The court then apportioned defense costs between the two insurers by applying a pro rata allocation based on the comparative value of the policy limits. Furthermore, the court awarded Steadfast attorney fees, arguing that Steadfast took the place of MMSD, and Greenwich would have owed MMSD attorney fees. This opinion marks the first time Wisconsin courts have awarded attorney fees for breach of a duty to defend from one insurer to another insurer who was subrogated to an insured’s rights.

The justices were split on several parts of the case, with three justices concurring in part and dissenting in part. Justice Ann Walsh Bradley, joined by Justice Rebecca Dallet, disagreed with the allocation of defense costs. Justice Walsh Bradley argued Greenwich should be liable for the entirety of the defense costs as a penalty for declining to uphold its duty to defend. However, Justice Walsh Bradley’s dissent also argues requiring Greenwich pay attorney fees sets a dangerous precedent because it departs from the “American Rule” that parties are responsible for their own attorney fees unless provided by contract or statute.

In another partial dissent, Justice R. Bradley agreed that defense costs should be allocated pro rata, but disagreed that Greenwich had a duty to defend. Justice R. Bradley noted that she agreed with Justice Walsh Bradley’s dissent regarding attorney fees.

In Yacht Club at Sister Bay Condo Association, Inc. v. Village of Sister Bay (2019 WI 4), the Supreme Court determined that each nuisance-causing event at a town concert venue is a new “event” triggering a new 120-day notice period for filing a claim against the town.

The Village of Sister Bay built an outdoor concert venue near the Yacht Club condominiums. When the village began hosting loud concerts into the night, the Yacht Club filed a written notice of injury against the village, claiming the noise pollution was a nuisance. The notice stated the date of the last concert (Sept. 1, 2015).

The village moved to dismiss the Yacht Club’s suit, arguing that the Yacht Club failed to serve the notice within 120 days of the date when the concerts began (August 2014). Conversely, the Yacht Club argued each new concert is a new “event giving rise to the claim” as required by Wis. Stat. § 893.80(1d)(a).

The Supreme Court unanimously agreed with the Yacht Club that each concert is a new event because, depending on the level and length of noise, not every concert is necessarily a nuisance. Common law of nuisance says that continued nuisances are new events, and in the instant case this interpretation does not conflict with the intent of the notice of claim law to provide governments sufficient information to prepare for litigation.

 

In Midwest Neurosciences Associates, LLC v. Great Lakes Neurosurgical Associates (2018 WI 112), the Supreme Court held that circuit courts may decide whether a dispute should be arbitrated when an original contract contains a mandatory arbitration clause but a subsequent contract does not.

The parties in this case entered into an “Operating Agreement” contract with a noncompete restrictive covenant. The Operating Agreement contained a mandatory arbitration clause, incorporating by reference a rule that the arbitrator has jurisdiction to rule on arbitrability of disputes arising from the contract.

In the process of restructuring, Midwest and Great Lakes drafted a “Redemption Agreement” that contained a merger clause releasing Great Lakes from the terms of the Operating Agreement. Because Midwest did not officially sign the Redemption Agreement, the parties dispute whether it is enforceable.

The underlying litigation in this case involves whether Dr. Pannu violated a noncompete clause in the Operating Agreement by engaging in competitive practice after he signed the Redemption Agreement. The issue before the Supreme Court was whether the circuit court had authority to determine arbitrability despite the original Operating Agreement mandating arbitrability be determined by an arbitrator.

In a 5-1 ruling (Justice Ziegler, joined by Justices Walsh Bradley, Kelly, and Chief Justice Roggensack, with Justice Abrahamson concurring), the court determined that the circuit court can determine arbitrability when a subsequent contract does not contain an arbitration clause, even if the original contract mandated arbitration. The court stated that freedom of contract principles allow parties who have agreed to arbitrate to subsequently contract out of the arbitration agreement. The court also found that, if valid, the Redemption Agreement would supersede the Operating Agreement’s arbitration clause. However, because there were still issues of material fact as to whether both parties formally agreed to the Redemption Agreement, the Supreme Court remanded the case to circuit court to determine the validity of the Redemption Agreement.

In her concurring opinion, Justice Abrahamson suggested that, because the subject matter of the Redemption Agreement differed from the Operating Agreement, the Redemption Agreement did not entirely supersede all terms of the Operating Agreement. Abrahamson said circuit courts do have the authority to determine whether any part of a subsequent contract (here, the Redemption Agreement) supersede arbitration provisions in a previous contract.

In a dissent, Justice R. Bradley argued that the question of whether the Redemption Agreement supersedes the Operating Agreement is an issue of substantive arbitrability governed by the Operating Agreement. Therefore, an arbitrator – not the courts – should decide whether the Redemption Agreement is valid.