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Vol. 72, No. 4, April 1999

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Court of Appeals Digest

By Prof. Daniel D. Blinka & Prof. Thomas J. Hammer

| Civil Procedure | Criminal Procedure |
| Family Law | Insurance |
| Sex Predator Law | Torts |

Auto Coverage - Notice of Policy Changes - Stacking

 Hanson v. Prudential Property & Casualty Ins. Co., No. 98-0692 (filed 12 Jan. 1999) (ordered published 23 Feb. 1999)

Hanson was involved in a serious car accident. He settled with the tortfeasor for $150,000 and then filed claims with his own insurer, Prudential, for uncompensated injuries. Prudential denied coverage. Prudential filed this appeal from a judge's determination that Hanson was an "underinsured motorist" according to a "'damages basis' definition" set forth in a "prior coverage period automobile liability policy" and that Hanson could "stack" his underinsured (UIM) coverage. The court of appeals, in an opinion written by Judge Myse, affirmed in part and reversed in part.

As to the first issue, Prudential argued that Hanson failed to meet the "limits basis" definition of "underinsured motorist" contained in a renewal policy. The court held, however, that Prudential failed to comply with the statutory notification procedures required by section 631.36(5), of the Wisconsin Statutes and thus could not assert the new definition. The statute "requires that when an insurer offers to renew a policy on new, less favorable terms within sixty days of the renewal date, the insurer must inform the insured that the new terms do not become effective until sixty days after the renewal is sent or delivered and that the insured has a corresponding sixty days within which to elect to renew or cancel the policy. Because Prudential's right to cancel notice did not provide this information, it is insufficient under the statute."

On the second issue, the trial judge erred by ruling that Prudential failed to notify Hanson of statutory changes that affected the anti-stacking clause in the policy. Case law requires statutory notification of only those changes initiated by the insurer.

Discovery - Court-appointed Experts - Reports

State v. Rachel, No. 98-2074 (filed 27 Jan. 1999) (ordered published 23 Feb. 1999)

Rachel was committed as a sexually violent person under chapter 980 of the Wisconsin Statutes. Because of his indigency, Rachel asked the court to appoint an expert to examine him under section 980.03(4). The issue is whether chapter 980 commitment proceedings are subject to the discovery mechanisms in the rules of civil procedure. In particular, Rachel opposed the state's efforts to depose his expert and discover the expert's notes, recordings, or reports. Although chapter 980 specifically provides that the so-called "rules of criminal evidence" govern sexual predator commitment trials, the court held that the "rules of civil procedure" govern discovery and related matters (emphasis added). On the record, however, it was not clear that Rachel intended to call this expert as a witness. Absent such a showing, Rachel could shield the expert's opinions through the work product doctrine.

Economic Loss Doctrine - Used Equipment -
Damage to "Other Property"

Cincinnati Insurance Co. v. AM International Inc., No. 98-0006 (filed 13 Jan. 1999) (ordered published 23 Feb. 1999)

Harris-Intertype Corporation was a manufacturer of printing presses. In 1975 Harris ceased manufacturing presses but continued to manufacture and sell replacement parts for those presses. Harris later was purchased by another company which in turn was purchased by defendant AM International in 1986. AM continued to operate the replacement parts business until 1995.

Burton & Meyer Inc. is a commercial printing company in Milwaukee. In 1991 it purchased a 1973 Harris printing press in an "as is/where is" condition. Sometime between 1986 when AM International acquired Harris's replacement parts business and 1991 when the press was purchased by Burton & Meyer, a gear in the press was removed and replaced by a gear manufactured and sold by AM International. In 1994 one or more of the teeth on the gear broke off and caused damage to the press, bringing production to a halt. Burton & Meyer suffered more than $130,000 in property damage, repair costs, and loss of business income. It was compensated for its loss by its insurer, Cincinnati Insurance Company. Cincinnati then brought this subrogation action against AM International for negligence and strict liability. AM filed a motion for summary judgment, arguing that Cincinnati's claims were barred by the economic loss doctrine. The circuit court denied the motion.

The sole issue on appeal was whether the economic loss doctrine applies where a commercial purchaser buys used equipment containing a defective replacement part that later causes damage to the equipment and results in repair costs and loss of business income. According to the economic loss doctrine, a commercial purchaser of a product cannot recover from a manufacturer under tort theories of negligence or strict products liability damages that are solely "economic" in nature. Generally, economic loss refers to a decrease in the value of a product because it is inferior in quality and does not work for the general purposes for which it was manufactured and sold. The economic loss doctrine does not bar a commercial purchaser's claims based upon personal injury or damage to property other than the product, or economic loss claims that are alleged in combination with noneconomic losses. "In short, economic loss is damage to a product itself or monetary loss caused by the defective product, which does not cause personal injury or damage to other property." See Daanen & Janssen Inc. v. Cedarapids Inc., 216 Wis. 2d 394, 573 N.W.2d 842 (1998).

In a decision authored by Judge Snyder, the court of appeals was persuaded that AM International's gear was a component part of the Harris press and that the rest of the press that was damaged cannot be considered "other property" for purposes of the economic loss doctrine. The replacement gear was specifically designed by AM to replace gears in the press. As such, it has no function apart from the machine for which it was manufactured. The court's conclusion was not altered by the fact that the replacement gear was manufactured at a different time and by a different company than the press itself. Considering the age of the press, it should have been no surprise to Burton & Meyer that the press contained replacement parts. The court concluded that it was immaterial that defective parts of a machine are replacements for purposes of the economic loss doctrine.

The court noted that contract law and warranty law are better suited than tort law for dealing with purely economic loss in the commercial arena. In this case Burton & Meyer's losses were solely economic. Because Cincinnati's claims were for negligence and strict liability, it was attempting to recover in tort what are essentially contract damages. For these reasons, the court of appeals reversed the trial court's judgment and remanded with directions that the trial court enter summary judgment in favor of AM International.

Superseding Causes - Arson

Giebel v. Richards, No. 97-2085 (filed 19 Jan. 1999) (ordered published 23 Feb. 1999)

An arsonist started a fire at an apartment building which spread and destroyed an adjacent garage and attached building owned by the Giebelses. The Giebelses sued the apartment building owners under a variety of theories. A jury allocated causal negligence at 55 percent for the apartment owners, 30 percent for the tenants who placed the garbage that the arsonist ignited, and 15 percent to the Giebelses.

The court of appeals, in an opinion written by Judge Schudson, reversed. The court agreed that the doctrine of "superseding cause" relieved the apartment owners of liability. Even assuming that the owners bore some responsibility for the garbage that accumulated behind the apartment building, it was "highly unlikely" that an arsonist would ignite it.

Medical Malpractice - Chiropractors - Statute of Limitations

Arenz v. Bronston, No. 98-1357 (filed 21 Jan. 1999) (ordered published 23 Feb. 1999)

The sole issue in this case concerned whether the plaintiff's malpractice action against a chiropractor was governed by the general personal injury statute of limitations, section 893.54 of the Wisconsin Statutes, or the medical malpractice statute of limitations, section 893.55 of the Wisconsin Statutes. The former permits actions to be filed within three years of the discovery of an injury while the latter restricts such actions to within one year of the discovery. The court held that a chiropractor is a "health care provider" within the meaning of section 893.55; thus, the one-year statute applies. Chiropractors diagnose, treat, and care for their patients and are licensed by the state examining board. The plaintiff's failure to file the action within one year of the injury's discovery rendered her complaint time-barred.

Prof. Daniel D. Blinka and Prof. Thomas J. Hammer invite comments and questions about the digests. They can be reached at the Marquette University Law School, 1103 W. Wisconsin Ave., Milwaukee, WI 53233, (414) 288-7090.