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Graff v. Continental Indemnity Co. (Worker’s Compensation Exclusive Remedy)

Posted on by Hamilton

In Graff v. Continental Indemnity Co. (2018AP1782), the Court of Appeals District III held that the worker’s compensation exclusive remedy bars tort actions based on negligent denial of benefits by an insurance company.

Plaintiff Francis Graef developed depression as a result of a work-related injury. Continental, Graef’s employer’s worker’s compensation insurer, approved initial payments for medication to address Graef’s depression. When Graef tried to refill his prescription in June 2015, Continental did not approve the payment before Graef left the pharmacy without his prescription. In August 2015, Graef made a suicide attempt.

Graef filed this action for damages associated with his suicide attempt, alleging that Continental was negligent when it failed to continue to authorize and pay for his prescription medication to treat his depression. Continental sought to dismiss the claim, arguing that Wisconsin’s worker’s compensation law was the exclusive remedy for the claim.

The court agreed that worker’s compensation was the exclusive remedy for Graef’s claim. The worker’s compensation statute provides that “the right to recovery of compensation under this chapter shall be the exclusive remedy against…the worker’s compensation insurer” (Wis. Stat. § 102.03(2). Graef’s depression was the result of a workplace injury, so his employer – and Continental as the employer’s worker’s compensation insurer – were liable under the worker’s compensation law. Therefore, the exclusive remedy provision applied, blocking Graef’s tort claims.

Applegate-Bader Farm, LLC v. DOR (Agency Rulemaking Procedures)

Posted on by Hamilton

*This case is recommended for publication.

 

In Applegate-Bader Farm, LLC v. DOR (2018AP1239), the Court of Appeals District IV held that the Wisconsin Department of Revenue (DOR) complied with rulemaking procedures in Wis. Stat. Ch. 227 when it promulgated new rules regarding property tax classification.

 

Background

Wisconsin law provides certain incentives for property owners to participate in state and federal easement programs to achieve agricultural and/or environmental benefits. One incentive for landowners participating in easement programs is property tax classification as “agricultural use,” which is typically a lower tax rate. DOR proposed rules making changes to how and which properties participating in easements qualified for agricultural use classification for property tax purposes.

DOR’s initial draft of the rule listed certain criteria for determining if a property enrolled in an easement program met the definition of agricultural use. Plaintiff Applegate-Bader Farm, which was enrolled in a federal easement program, would have qualified for agricultural use classification under the initial draft.

After holding a public hearing, DOR made substantial changes to the draft rule that changed which properties would be eligible for agricultural use classification. The governor and legislature subsequently approved the rule in accordance with Ch. 227, and DOR promulgated the rule.

 

Plaintiff’s Claims

Applegate-Bader Farm filed this lawsuit seeking to invalidate the rule because DOR allegedly violated Ch. 227 rulemaking procedures by not revising the scope statement, revising the economic impact analysis, or holding another public hearing on the rule after the department made changes to the initial draft rule. Additionally, Applegate-Bader Farm argued that DOR did not sufficiently investigate the need for an environmental impact statement according to the Wisconsin Environmental Protection Act (WEPA).

 

Ch. 227

 First, Applegate-Bader Farm argued that DOR violated § 227.135(2), which prohibits agency employees from working on drafting a rule before a scope statement is approved. Before scope statement approval, agency employees are limited to working only on preparing the scope statement. The court found that Applegate-Bader Farm did not adequately identify DOR communications constituting work on drafting the rule rather than communications related to preparing the scope statement.

Next, Applegate-Bader Farm argued that DOR violated § 227.135(4) requirements that agencies prepare a revised scope statement when “meaningful or measurable” changes are made. Applegate-Bader Farm proposed that any “meaningful or measurable” changes to the draft rules are “meaningful or measurable” changes requiring a revised scope statement. In this case, according to Applegate-Bader Farm, the changes DOR made to its initial rule draft were “meaningful and measurable” and therefore required DOR to issue a revised scope statement. The court agreed with DOR that a revised scope statement is required only when changes to draft rules “meaningfully and measurably” change the scope of the rules. In this case, DOR’s changes to the initial draft rules would not change the substance of the scope statement, so DOR was not obligated to issue a revised scope statement. The court found it would be unreasonable for agencies to have to re-scope draft rules every time they make changes to the draft rules.

Applegate-Bader Farm also argued that DOR should have held another public hearing after changing the initial draft rule. Previous case law Brown County v. DHSS (1981) held that agencies are required to hold an additional public hearing if changes to draft rules significantly differ from initial drafts. In this case, the court found that interested parties had adequate opportunity for input and influence at the first DOR hearing on the proposed rules, so another hearing was not required after DOR made the changes based on input from the first hearing.

Finally, Applegate-Bader Farm argued that DOR violated § 227.137(4) by failing to revise its economic impact analysis after changing the initial draft rules. The court found that Applegate-Bader Farm failed to establish that there would be “significant” changes to the economic impact due to the changes in the draft rule.

 

WEPA

Applegate-Bader Farm claimed that DOR’s decision not to prepare an environmental impact statement on the rule violated WEPA (Wis. Stat. § 1.11(2)). The court dismissed the WEPA claim, finding Applegate-Bader Farm’s argument that the proposed rule would have only “indirect effects” on the environment was insufficient. Previous case law holds that even significant indirect effects do not require agencies to prepare environmental impact statements. Since the plaintiff here alleged only indirect and no direct environmental effects, the court dismissed the WEPA violation claim.

 

 

For more on rulemaking procedures and statutory changes to Wisconsin rulemaking in the past few years, visit: https://www.hamilton-consulting.com/hcg-guide-to-the-wisconsin-administrative-rules-process/.

 

 

Storm v. Wisconsin Mutual Insurance Co. (UIM Reducing Clause)

Posted on by Hamilton

In Storm v. Wisconsin Mutual Insurance Co. (2018AP1285), the Court of Appeals District III found that an insurer gave proper notice to its insured about a policy change adding a reducing clause. Therefore, the policy was valid, and the underinsured motorist (UIM) limit was properly reduced.

Teresa Storm was injured in a car accident and sued the other drivers and their insurers. After receiving the policy limit of $50,000 from one of the other drivers, Storm sought the $100,000 UIM coverage limit from her own insurer Wisconsin Mutual. Wisconsin Mutual paid Storm $50,000 based on the reducing clause in Storm’s policy.

On appeal, Storm argued that the reducing clause in her policy was invalid because Wisconsin Mutual failed to provide her proper notice under Wis. Stat. § 631.36(5) when it added the reducing clause to her policy. Section 631.36(5) requires insurers to notify policyholders sixty days prior to renewal when the renewing policy contains new terms less favorable to the insured.

The court found that the reducing clause was valid because Wisconsin Mutual did provide notice to Storm more than sixty days prior to when her policy was renewed with the reducing clause. Wisconsin Mutual sent an initial letter informing Storm of new legislation that allowed UIM reducing clauses. The initial letter noted that Storm’s coverage would change upon her next policy renewal. Wisconsin Mutual sent a second notification letter to Storm when her policy actually renewed with the new UIM reducing clause several months later.

The court rejected Storm’s argument that Wisconsin Mutual’s sixty day notice was untimely because Wisconsin Mutual sent the initial letter more than sixty days before Storm’s policy changed. Additionally, even if the initial letter did not suffice as notification under § 631.36(5), the statute provides that, upon violation, the original policy applies for an additional renewal period. Storm’s additional renewal period of six months had expired by the time the accident occurred, so the new policy with the reducing clause applied.

Because the court found the reducing clause in Storm’s policy valid, Storm’s $100,000 UIM coverage limit was reduced by the $50,000 paid to Storm by the other driver in the accident.

Hendrix v. Secura Insurance (Safe Place Statute)

Posted on by Hamilton

In Hendrix v. Secura Insurance (2018AP1103), the Court of Appeals District III allowed a plaintiff’s slip-and-fall safe place statute claim against the operator of a parking lot to proceed. The court found that the operator of the parking lot, Dedicated Fleet Services, could have had constructive notice of the unsafe condition, whereas the owner of the parking lot, 4X Corp., did not have constructive notice, dismissing 4X from the safe place statute claim.

Plaintiff George Hendrix slipped and fell in the parking lot of Dedicated Fleet Services. Hendrix then filed the instant safe place statute and negligence claims against Dedicated Fleet Services and 4X, which leased the parking lot to Dedicated Fleet Services.

Dedicated Fleet Services moved for summary judgment, arguing it did not have control over the snow removal and Hendrix did not provide evidence that Dedicated Fleet Services had constructive notice of the hazard. Under Dedicated Fleet Services’s contract with 4X, Dedicated Fleet Services would inform 4X of any snowfall, and 4X would be responsible for snow removal on the premises. However, testimony indicated that Dedicated Fleet Services did not notify 4X of the snowfall that occurred just before Hendrix’s injury. Because it was disputed whether Dedicated Fleet Services followed appropriate procedures for snow removal, the court found there was an issue of material fact barring summary judgment for Dedicated Fleet Services. Hendrix’s claim against Dedicated Fleet Services was allowed to proceed.

4X also moved for summary judgment, arguing it did not have constructive notice of the unsafe condition in the parking lot. The circuit court granted 4X’s motion for summary judgment, agreeing that 4X, as owner of the property, was not responsible for day-to-day operations and would not have had notice of the unsafe snow in the parking lot. On appeal, Dedicated Fleet Services argued that the circuit court improperly dismissed the claims against 4X. However, the appeals court found that Dedicated Fleet Services had forfeited the argument against 4X by failing to oppose 4X’s motion for summary judgment at the circuit court level.

Lampe v. State Farm Mutual Insurance Co. (Future Medical Expenses)

Posted on by Hamilton

In Lampe v. State Farm Mutual Insurance Co. (2019AP656), the Court of Appeals District I found insufficient evidence for a jury award of future health care expenses to a plaintiff injured in a car accident.

Plaintiff Brian Lampe was injured in a car accident and sued the other driver and his insurer State Farm. The parties entered into a stipulation that the other driver’s negligence caused Lampe’s injuries, so the only question left at trial was the damages owed to Lampe.

At trial, the jury awarded Lampe $175,000, including $45,000 in future health care expenses. On appeal, State Farm argued there was insufficient evidence for the jury to award any future health care expenses to Lampe.

The appeals court agreed with State Farm and reversed the trial court award of future health care expenses. Awards of future health care expenses must be supported by expert testimony that future treatment is required and testimony on the cost of such treatment. The court found that expert testimony provided by Lampe failed to establish the cost of future treatment.

Although Lampe’s expert physician acknowledged Lampe might need future pain treatment, the physician did not specify the actual cost of the treatment nor how many treatments would be necessary. The court rejected Lampe’s argument that the jury could have calculated cost of future treatment based on Lampe’s past medical bills. Therefore, the jury had no basis on which to award future health care expenses.

Nooyen v. Wisconsin Electric Power Co. (Construction Statute of Repose)

Posted on by Hamilton

*This case is recommended for publication.

 

In Nooyen v. Wisconsin Electric Power Co. (2019AP289), the Court of Appeals District III dismissed safe place statute claims based on the plaintiff’s husband’s development of mesothelioma from asbestos. The court found the construction statute of repose barred the claims.

Norbert Nooyen was working on the construction of two nuclear power plants owned by the utility defendants Wisconsin Electric Power Co., Madison Gas & Electric Co., Wisconsin Power & Light Co., and Wisconsin Public Service Corp. In 2016, Nooyen was diagnosed with mesothelioma. Nooyen and his wife filed the instant lawsuit alleging that his mesothelioma was caused by asbestos at the plants and that the utilities violated the safe place statute (Wis. Stat. § 101.11(1)). The safe place statute states that owners have a duty to construct, repair and maintain buildings safely.

The court found that the construction statute of repose (Wis. Stat. § 893.89) barred the Nooyens’ safe place statute claim.[1] Previous case law holds that the statute of repose bars after ten years claims resulting from “structural defects” inherent to the construction of a building, but allows claims resulting from “unsafe conditions” due to improper maintenance and repair to proceed. At issue here was whether Nooyen’s injury resulted from a structural defect or unsafe condition.

Since Nooyen worked and was exposed to asbestos during the original construction of the power plants, the court found his injury resulted from a structural defect. Therefore, because the Nooyens filed their claim more than ten years after the power plants were completed, the statute of repose barred the Nooyens’ claims.

The court also found that the maintenance exception to the statute of repose did not apply to the Nooyens’ claims because the exception applies only to owners’ failure to maintain the construction itself, not failure to maintain a safe workplace, as plaintiffs had argued.

The court also rejected Nooyen’s argument that because the legislature included a statute of repose exception for actions based on latent diseases in 2011 products liability reforms, the Legislature now has embraced policy “to preserve rights of latent disease victims to recover.” The court found that the legislature would have to adopt a specific latent disease exception for the construction statute of repose for that public policy to apply.

Finally, the court found that the construction statute of repose, enacted in 1994, did apply to Nooyen’s claims because he was not diagnosed until 2016. The court held that its decision did not violate Nooyen’s constitutional right to a legal remedy (Wis. Const. Art. I § 9) because the statute of repose extinguishes the right to remedy after the repose period.

 

 

 

 

[1] WCJC helped shorten the construction statute of repose from ten years to seven years in 2017 Act 235. However, this case began in 2017 before the enactment of Act 235, so the ten year statute of repose applied.

Delglyn v. Equifax (Fair Credit Reporting Act)

Posted on by Hamilton

In Delglyn v. Equifax (2019AP232), the Court of Appeals District I dismissed the plaintiff’s claims that Equifax violated the federal Fair Credit Reporting Act (FCRA) in its responses to the plaintiff’s notices of disputed items on his credit report.

Plaintiff James Delglyn sent a notice of dispute to Equifax regarding four accounts on his credit report. The entity running each of the four accounts responded and verified Delglyn’s accounts, and Equifax informed Delglyn of the results. Delglyn filed two more notices of dispute to Equifax regarding some of the accounts. Equifax reinvestigated those accounts and informed Delglyn accordingly.

Delglyn filed the instant complaint against Equifax, alleging that he had been denied a loan based on the Equifax reports, which he claimed failed to comply with the FCRA.

The FCRA provides that credit reporting agencies like Equifax must follow “reasonable procedures” to ensure accuracy. If a consumer notifies the agency of a dispute, the agency must conduct a “reasonable investigation.” Consumers like Delglyn alleging violations of the FCRA must establish that there was inaccurate information on their credit report because the agency did not follow “reasonable procedures” and that the inaccuracy caused damages.

The court found that Equifax did conduct a “reasonable investigation” into the accuracy of Delglyn’s accounts. Since the entities running the accounts verified the information with Equifax, Delglyn could not demonstrate that there was inaccurate information on his credit report. Therefore, Delglyn did not suffer damages due to an inaccuracy caused by Equifax, so his claims were dismissed.

Veritas Steel, LLC v. Lunda Construction Co. (Successor Liability)

Posted on by Hamilton

In Veritas Steel, LLC v. Lunda Construction Co. (2019 WI 3), the Wisconsin Supreme Court declined to expand the “de facto merger” and “mere continuation” exceptions to the general rule against successor liability.

Construction contractor Lunda had secured a $16 million judgment against steel fabricator PDM Bridge, LLC. PDM also owed other lenders approximately $76 million. Those lenders used a series of transactions to acquire PDM’s assets, which were ultimately obtained by the entity Veritas. PDM could not satisfy Lunda’s $16 million judgment, and Lunda sought the instant successor liability claim against Veritas.

The rule against successor liability generally provides that a successor corporation purchasing another corporation does not become liable for the seller corporation’s assets. There are several exceptions to the rule against successor liability in Wisconsin case law, including

  • The “de facto merger” exception, when the transaction is essentially a consolidation or merger of the purchaser and seller. The key element to prove a “de facto merger” exception is the transfer of ownership from the purchaser to seller via stock or equity in the purchaser corporation, instead of cash.
  • The “mere continuation” exception, when the purchaser corporation is a continuation of the seller corporation. The key element to prove a “mere continuation” exception is a when officers, directors and stockholders in the seller and purchaser corporations are largely the same.

Both the “de facto merger” and “mere continuation” exceptions require a successor liability claim to demonstrate an identity of ownership, based on the key elements described above, between the purchaser and seller corporation.

Lunda argued that previous case law Fish v. Amsted Indus. Inc. (1985) expanded the “de facto merger” and “mere continuation” exceptions, allowing successor liability claims to demonstrate an “identity of management and control” instead of identity of actual ownership. However, the Supreme Court declined to expand its reading of Fish, maintaining that successor liability claims must show an identity of ownership to establish the “de facto merger” and “mere continuation” exceptions to the general rule against successor liability.

The Supreme Court dismissed Lunda’s claims, upholding the general rule against successor liability because Lunda had not demonstrated an identity of ownership between PDM and Lunda. Since Lunda had not established an actual transfer of stock or equity between PDM and Veritas, the “de facto merger” exception did not apply. Since there was no common identity of officers, directors and stockholders between PDM and Veritas, the “mere continuation” exception did not apply.

 

Concurring Opinion

In a concurring opinion, Chief Justice Roggensack agreed with the dismissal of Lunda’s claims but would have examined the case in a different context. The concurring opinion focused on whether PDM’s assets were lawfully removed from Lunda’s reach by the serious of transactions that ultimately ended with Veritas. The concurring opinion concluded that the assets were lawfully removed under the strict foreclosure process laid out in Wis. Stat. § 409.620. Therefore, Lunda’s claims were properly dismissed.

Hinrichs v. Dow Chemical Co. (Fraudulent Representation)

Posted on by Hamilton

In Hinrichs v. Dow Chemical Co. (2020 WI 2), the Wisconsin Supreme Court dismissed misrepresentation claims on the basis of the economic loss doctrine, but ruled the plaintiff might be considered “the public” for the purposes of bringing a statutory fraudulent representation claim. The court further found that heightened pleading standards for fraud claims do not apply to claims made under Wisconsin’s fraudulent representation statute (Wis. Stat. § 100.18).

The opinion was written by Justice Walsh Bradley, joined by Chief Justice Roggensack, Justice Ziegler, and Justice Dallet. Justice R. Bradley wrote a concurring opinion joining the justices’ decision on the common law claims but dissenting from the decision on the § 100.18 claim. (Justices Kelly and Hagedorn did not participate.)

 

Facts

Chris Hinrichs developed acrylic skylight panels for vehicles and owned Autovation Limited, which manufactured, distributed, and installed the panels. Autovation used a Dow Chemical adhesive to install the panels. When Hinrichs discovered some of the panels were cracking, an agent from Dow issued him a report stating that the adhesives were properly functioning. However, Hinrichs later discovered that the adhesives in the panels were in fact failing, damaging his products and significantly affecting his sales. Hinrichs and Autovation filed the common law claims against Dow for negligent misrepresentation, intentional misrepresentation, and strict responsibility misrepresentation, and a statutory claim of violation of the fraudulent representation statute § 100.18.

 

Common Law Claims

The court barred Hinrichs’s common law misrepresentation claims based on the economic loss doctrine, which provides that plaintiffs cannot sue to recover solely economic losses from the nonperformance of a contract.

The court ruled the “fraud in inducement” exception to the economic loss doctrine did not apply because the alleged misrepresentation was not extraneous to the contract. The “other property” exception to the economic loss doctrine did not apply because the damaged panels and the adhesive the parties contracted for were parts of an integrated system.

Under the economic loss doctrine, Hinrichs and Dow had the opportunity to address these circumstances in their contract and, since they declined to do so, Hinrichs was not entitled to damages for economic loss.

 

Fraudulent Representation Claim

In addition to the above common law misrepresentation claims, Hinrichs brought a claim against Dow for violation of § 100.18, which states that companies cannot make advertisements to the public containing untrue, deceptive, or misleading assertions. The court allowed Hinrichs’s statutory claims to proceed for the following reasons.

The court found first that the economic loss doctrine does not apply to statutory claims made under § 100.18. The economic loss doctrine is a common law restriction, and § 100.18 creates a specific statutory cause of action. The Legislature chose to provide a remedy for false advertising outside of common law, so the common law policy of the economic loss doctrine cannot apply to the statutory claim.

The court then affirmed previous case law stating that one person (in this case Hinrichs) can be “the public” for the purposes of bringing a fraudulent misrepresentation claim under § 100.18. On the grounds of stare decisis, the court upheld State v. Automatic Merchandisers (1974), which held that one person can be “the public” for purposes of bringing a § 100.18 claim, unless the plaintiff and the defendant have a “particular relationship.” The court found that Hinrichs alone could be “the public” but remanded to the circuit court the question of whether Hinrichs had a “particular relationship” with Dow that would bar his claim.  

Finally, the court held that the heightened pleading standards for fraud claims in § 802.03(2) do not apply to § 100.18 claims. Thus Hinrichs’s complaint met the general pleading standards and can proceed.

 

Concurring Opinion

In a concurring opinion, Justice R. Bradley argued that Hinrichs should not be considered “the public” for the purposes of § 100.18. According to the concurring opinion, the plain meaning of “the public” in the fraudulent representation statute is people in the general community, not businesses in a commercial relationship like Hinrichs and Dow.

The concurring opinion argued that the court misconstrued Automatic Merchandisers. In that case, the business accused of fraudulent representation had made advertisements to the public in a newspaper then made fraudulent claims to individual respondents to the ads. The court found that a single individual who responded to the public ads could be considered “the public” for purposes of bringing a § 100.18 claim. The concurring opinion argued Hinrichs differed from Automatic Merchandisers because Dow never broadcast fraudulent claims to the general public. Instead, the alleged fraudulent claims occurred in an individual email to Hinrichs.

The concurring opinion argued the court’s decision that Hinrichs could bring a § 100.18 claim reads “the public” completely out of the statute, eliminating any parameters around who can bring such claims. According to the concurring opinion, the court’s “particular relationship” test to determine whether an individual is “the public” has no foundation in statutory text and only creates more ambiguity in the statute.

Thus the concurring opinion would have decided, based on the plain meaning of the statute, that Hinrichs was not a member of “the public” under § 100.18, barring his statutory claim. 

Kiewiz v. My Custom Shop, Inc. (Warranty)

Posted on by Hamilton

In Kiewiz v. My Custom Shop, Inc. (2018AP2008), the Court of Appeals District II dismissed the plaintiff’s claims of misrepresentation and breach of warranty against the dealer from whom he purchased a truck.

After test driving the truck, plaintiff Kiewiz bought the truck from My Custom Shop for $3,800. My Custom Shop told Kiewiz it would repair parts of the truck it had installed based on the part manufacturer’s warranty. But the written purchase contract and the buyer’s guide My Custom Shop provided to Kiewiz clearly stated that the sale of the truck was “as is” and disclaimed any warranty.

Kiewiz experienced several issues with the truck and eventually asked My Custom Shop for a full refund. My Custom Shop refused, and Kiewiz filed the instant claims for misrepresentation, fraudulent practices, breach of implied warranty, and violation of the federal Magnuson-Moss Warranty Act. The appeals court dismissed all of Kiewiz’s claims.

On misrepresentation (Wis. Stat. § 100.18), the court found that My Custom Shop had performed reasonable inspections and made no misrepresentations in the buyer’s guide. Furthermore, Kiewiz failed to show that any of My Custom Shop’s representations led him to purchase the truck and thus caused him to incur a loss.

On fraudulent practices (Wis. Stat. § 218.0163), the court again found that My Custom Shop had taken reasonable care when inspecting the vehicle, so Kiewiz could not prove fraud.

On breach of implied warranty (Wis. Stat. § 402.314), the court found that the buyer’s guide and purchase contract clearly stated that the sale was “as is,” thus precluding any implied warranty.

On the federal claim, the court found My Custom Shop did not violate the prohibition against dealers disclaiming warranties and service contracts. The federal law prohibition applies to written warranties, and My Custom Shop provided no written warranty to Kiewiz.

For these reasons, Kiewiz’s claims were dismissed.