Wisconsin Lawyer
Vol. 78, No. 10, October
2005
Court of Appeals Digest
This column summarizes selected published
opinions of the Wisconsin Court of Appeals. 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.
by Prof. Daniel D. Blinka & Prof. Thomas J. Hammer
Arbitration
Arbitration Agreements - Unavailability of Arbitrator Named
in Agreement
Madison Teachers Inc.
v. Wisconsin Educ. Ass'n Council, 2005 WI App 180 (filed 6 July
2005) (ordered published 31 Aug. 2005)
The issue in this case was whether the circuit court erred in ruling
that the unavailability of the arbitrator, who was identified by name in
an arbitration provision of the parties' affiliation agreement, resulted
in a dissolution of the arbitration provision. In a majority decision
authored by Judge Wedemeyer, the court of appeals concluded that the
primary purpose of the dispute resolution provision in the agreement was
to arbitrate disputes that arose between the parties, and therefore that
the unavailability of the named arbitrator did not nullify the
arbitration provision (see ¶ 6).
The court said that the general rule under the Federal Arbitration
Act, 9 U.S.C. §§ 1-16 and the Wisconsin Arbitration Act, Wis.
Stat. §§ 788.01-.18, which is patterned after the federal act,
is that "`where the arbitrator named in the arbitration agreement cannot
or will not arbitrate the dispute, a court does not void the agreement
but instead appoints a different arbitrator.' This rule is qualified,
however, when it appears that the named arbitrator is central to the
arbitration agreement. In other words, if the agreement makes clear that
arbitration was only acceptable to the parties on the specific
condition that a particular individual arbitrator is utilized, then
the unavailability of that person results in nullification of the entire
arbitration provision" (¶ 10) (citations omitted). Thus, the
question before the court was whether having the person named in the
agreement arbitrate this dispute was "as important a consideration as
the agreement to arbitrate itself" (id.).
The appellate court began its analysis by stating its presumption
that the primary purpose of the agreement was to arbitrate any and all
disputes that arose between the parties who were covered under the
agreement (see ¶ 12). It then observed that "[w]hen one
particular term of an arbitration agreement has failed, we look to the
intent of the parties at the time the agreement was entered to determine
whether a substituted term should be inserted or whether the agreement
will fail altogether" (¶ 12). In order to ascertain that intent,
the court looked to the language of the agreement and the surrounding
circumstances. The fact that the agreement identifies an arbitrator by
name supported the argument that this individual was an important part
of the agreement. The agreement language also indicates, however, that
the parties wanted prompt resolution of their disputes. Further, "there
is no language specifically stating that if [the named arbitrator] is
not available, then the parties prefer to take their disputes to the
courthouse" (¶ 13).
The surrounding circumstances, as evidenced by the history the
parties shared (which is recounted in the opinion at ¶ 14),
suggested to the court that arbitration by a neutral party was "the
central factor" to these parties. "The history between these parties
demonstrates that arbitration was the overriding consideration, rather
than the existence of a specifically named arbitrator. There is nothing
in the Agreement or the parties' conduct over the last twenty-five years
to suggest that [the named arbitrator] personally was more important
than the arbitration process itself. The circumstances clearly
demonstrate that the parties' chosen preference was resolution of
disputes by a neutral party without having to engage in litigation"
(¶ 14).
The court of appeals concluded that the trial court erred in ruling
that the named individual's ability to act as arbitrator was central to
the agreement and that without him no arbitration could take place. "We
hold that the essence of the dispute resolution provision was to
arbitrate all disputes before a neutral and objective third party
without having to rush to the courthouse" (¶ 15).
Judge Fine filed a dissenting opinion, in which he argued that the
named arbitrator was the "very essence" of the agreement's
dispute-resolution system and that with him no longer available, "that
essence is gone" (¶ 19).
Civil Procedure
Mediation - Settlements - Estoppel - Attorney's
"Assurances"
Affordable Erecting
Inc. v. Neosho Trompler Inc., 2005 WI App 189 (filed 6
July 2005) (ordered published 31 Aug. 2005)
Neosho hired Affordable Erecting to move Neosho's equipment. When
Neosho did not pay the bill for the move, Affordable sued for payment
and Neosho counterclaimed, alleging that an expensive lathe had been
damaged during the move. Affordable brought in its insurer, Acuity, to
defend on the counterclaims. The circuit court ordered mediation, and on
May 21, 2003, attorneys for Acuity, Affordable, and Neosho signed a
settlement agreement. Affordable's lawyer added the following notation
on the document: "Settlement contingent on approval from [Affordable's
owner] by May 22, 2003 at 12:00 p.m." Acuity later prepared a formal
settlement document and a stipulation and order for dismissal, which
were sent to all the parties along with settlement checks, as "agreed"
upon. Neosho signed the documents and cashed its check (as did its
insurer). Affordable did not sign the formalized settlement document or
the stipulation and order for dismissal, and it returned its settlement
check to Acuity without cashing the check (see ¶¶
2-5).
On July 24, 2003 the circuit court sent out an order for dismissal
with prejudice on the ground that the matter had not been diligently
prosecuted. Several follow-up letters were sent to Affordable requesting
its signature on the settlement documents, but Affordable did not sign
the documents. In March 2004 Affordable filed another action seeking
payment by Neosho. The circuit court dismissed the complaint, holding
that Affordable and Neosho had entered into a valid settlement agreement
and that Affordable was estopped from reasserting its contract
claim.
The court of appeals, in a decision written by Judge Snyder,
disagreed with the circuit court's holding as to the validity of the
settlement agreement but affirmed dismissal of the complaint on the
basis of the estoppel holding. First, the court of appeals held that
there was no valid settlement pursuant to Wis. Stat. section 807.05. The
court "agree[d] with Affordable that the mediated agreement does not
comport with the requirements of Wis. Stat. § 807.05. The verbal
assurances of Affordable's attorney do not satisfy the statutory
requirement that an agreement be `subscribed' by a party or the party's
counsel" (¶ 13). In past cases the court had "rejected the
contention that oral assurances satisfy the statutory requirements and
concluded that Wis. Stat. § 807.05 is an exception to the general
rule that oral agreements are binding" (¶ 14). Moreover, the court
has also rejected "the argument that a party may subscribe to an
agreement by his or her conduct alone" (¶ 15). "Because Wis. Stat.
§ 807.05 does not provide for a party to subscribe to an agreement
through verbal assurances or general conduct, the mediated agreement
between Affordable, Neosho, and the insurers is deficient. Consequently,
the circuit court's determination that Affordable's attorney's verbal
assurances along with Affordable's failure to diligently prosecute its
claim complied with § 807.05 reflects an erroneous view of the law"
(¶ 16).
The court of appeals also held, however, that dismissal of the
complaint was justified on the second ground, equitable estoppel. "All
of the elements required to invoke estoppel are present in this case.
Affordable concedes the first two elements of estoppel, stating that
`Affordable did not attend the mediation hearing and after the mediation
hearing Affordable was not decisive in assuring all parties that the
case was not settled.' However, it disputes that Neosho reasonably
relied on the mediated agreement because the contingent approval by
Affordable was not forthcoming" (¶ 18).
The court of appeals disagreed with Affordable. The court of appeals
held that the circuit court properly determined that "Neosho, General
Casualty, and Affordable's insurer, Acuity, acted in reasonable reliance
on the mediated agreement. Specifically, the court found that following
mediation, Acuity `immediately circulated a draft version of the more
formal Mutual Release and Settlement Agreement' and two weeks later sent
the `stipulation and order for dismissal along with settlement payments
to all parties.' Furthermore, Acuity acknowledged in its letter `the
above captioned matter has settled.' Neosho and General Casualty signed
the formalized settlement agreement and cashed their settlement checks.
The court also observed that `[e]ven after the case was dismissed,
[Affordable] sat back and did nothing for eight months, until March 2004
when it re-filed the exact same complaint, word for word, in Waukesha
County.' Based on the record, we conclude that Neosho had no reason to
doubt that the settlement was final and binding" (¶ 19).
Jurisdiction - Preemption - Animal Vaccines
Patrick Fur Farm Inc.
v. United Vaccines Inc., 2005 WI App 190 (filed 26
July 2005) (ordered published 31 Aug. 2005)
Patrick, a large mink farm, purchased the BIOCOM-DP vaccine for its
mink herd from United Vaccines, which was federally licensed to sell the
drug. Later that year the mink herd suffered outbreaks of several
different diseases, which Patrick attributed to the vaccine's failure.
Patrick sued United Vaccines for damage to the herd and alleged that
United Vaccines made several misrepresentations about BIOCOM-DP's
effectiveness. Patrick also alleged breach of warranty. The circuit
court granted summary judgment in favor of United Vaccines on three
separate grounds, including federal preemption.
The court of appeals, in an opinion written by Judge Peterson,
affirmed. "The Viruses, Serums, Toxins, Antitoxins and Analogous
Products Act, 21 U.S.C. §§ 151-159, prohibits the preparation,
sale, barter or exchange of an animal vaccine that is `worthless,
contaminated, dangerous, or harmful ....' See 21 U.S.C.
§ 151 (1999). The Act also delegates authority to regulate animal
vaccines such as BIOCOM-DP. Regulatory authority of this vaccine
ultimately rests with a federal agency, the Animal and Plant Health
Inspection Service" (¶ 9).
"Under its authority, the agency has promulgated an extensive
regulatory scheme governing animal vaccines. See 9 C.F.R.
§§ 101-23 (2005). It has also expressed its intent to preempt
state law. `States are not free to impose requirements which are
different from, or in addition to, those imposed by [the United States
Department of Agriculture] regarding the safety, efficacy, potency, or
purity of a product.' 57 Fed. Reg. 38758, 38759 (Aug. 27, 1992)" (¶
10).
The court of appeals rejected Patrick's argument, based on a
Minnesota case, that "preemption analysis turns on whether [an
off-label] representation is substantially similar to BIOCOM-DP's
federally approved label" (¶ 12). The court was unpersuaded in
light of the federal agency's "express statement regarding its intended
scope of preemption: `where safety, efficacy, purity, and potency of
biological products are concerned, it is the agency's intent to occupy
the field'" (¶ 15).
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Criminal Law
Child Neglect - "Person Responsible for Child's Welfare" -
Application of Statute to 17-Year-Old Actor
State v.
Hughes, 2005 WI App 155 (filed 14 June 2005) (ordered published
29 July 2005)
Gooden asked Etter Hughes to care for Gooden's 1-year-old son because
Gooden was being evicted from her apartment. Etter Hughes agreed. During
the two weeks when Gooden's son was residing in the Hughes' home, Etter
Hughes asked her 17-year-old daughter to share responsibility for the
boy's welfare (a fact which the daughter admitted). The boy died and the
17 year old was charged in connection with the death, ultimately
pleading guilty to three charges, including a charge of child neglect
resulting in death.
The defendant filed a postconviction motion in which she sought to
withdraw her guilty plea to the child neglect charge. She claimed that
she cannot, as a matter of law, be considered a "person responsible for
the [victim's] welfare," which is an element of the child neglect
charge. The circuit court denied the motion and the court of appeals, in
a decision authored by Judge Wedemeyer, affirmed.
The crime of neglecting a child can only be committed by a "person
responsible for [the] child's welfare." See Wis. Stat. §
948.21(1). For purposes of chapter 948, a "person responsible for the
child's welfare" includes "the child's parent; stepparent; guardian;
foster parent; treatment foster parent; an employee of a public or
private residential home, institution or agency; other person legally
responsible for the child's welfare in a residential setting; or a
person employed by one legally responsible for the child's welfare to
exercise temporary control or care for the child." Wis. Stat.
§ 948.01(3) (emphasis added).
The court of appeals concluded that that "the plain language of the
statute makes clear that a seventeen-year-old employed by a parent to
care for the parent's child can be a person responsible for the welfare
of the child. The record reflects that [the defendant] freely chose to
assume responsibility for the welfare of [the one-year-old boy] at her
mother's request. Thus, [the defendant] became a voluntary caretaker of
[the child] and, as such, she was a person responsible for his welfare"
(¶ 16). The court was not persuaded by the defendant's contention
that because she was not yet 18, she cannot be considered a responsible
person. "There is no indication that the statutory language requires a
person to be eighteen years old in order to satisfy the definition"
(¶ 15).
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Criminal Procedure
Withdrawal of Insanity Plea - Personal Colloquy by Court Not
Required
State v.
Francis, 2005 WI App 161 (filed 15 June 2005) (ordered
published 29 July 2005)
The defendant entered pleas of not guilty and not guilty by reason of
mental disease or defect (NGI) to numerous charges arising out of a
single incident. She later accepted a plea bargain in which she pleaded
no contest to one count and guilty to several other counts. Her attorney
encouraged acceptance of the plea offer because the reduction in charges
reduced the potential prison sentence and because the doctor's report
did not support a viable NGI defense.
The defendant subsequently moved to withdraw her pleas, claiming that
the circuit court erred when it accepted her guilty and no contest pleas
without conducting a personal colloquy to ensure that she waived her NGI
plea knowingly, voluntarily, and intelligently. The circuit court denied
the motion and the court of appeals, in a decision authored by Judge
Brown, affirmed.
The court concluded that "only fundamental constitutional rights
warrant [the] special protection [of a personal colloquy] and that an
NGI plea falls outside the realm of fundamental rights" (¶ 22).
Further, with regard to whether the judge must personally address the
defendant to ensure a knowing, voluntary, and understanding waiver of an
NGI plea, the court discerned the following "prevailing rules" from
cases in multiple jurisdictions (including Wisconsin):
"First, defendants can withdraw their NGI pleas through counsel
rather than personally. In deciding whether to withdraw a plea of NGI,
counsel has no right to act contrary to the defendant's expressed
wishes, as the decision ultimately belongs to the defendant. In the
absence of an objection, however, counsel acts on the defendant's behalf
when counsel withdraws the defendant's NGI plea and may exercise
professional discretion in choosing whether or not to do so" (¶ 23)
(citations omitted). "In accepting counsel's withdrawal of an NGI plea,
the circuit court need not personally address the defendant to ascertain
his or her assent" (¶ 24) (citations omitted).
"Moreover, some courts even recognize implicit withdrawals of NGI
pleas, i.e., nobody, including defense counsel, formally
withdraws the plea. The Ohio courts have held that a validly entered
guilty plea automatically waives any insanity defense because such a
plea amounts to an implied admission of sanity and has the same effect
as an adjudication of guilt following a trial.... A valid guilty
plea entered by a defendant is an `implied admission of sanity.' Thus,
when a defendant enters a plea of not guilty by reason of insanity, and
then later enters a plea of guilty without formally withdrawing the not
guilty by reason of insanity plea, the defendant has waived any argument
pertaining to the insanity defense" (¶ 25) (citations omitted).
"Based [on the cases from which these principles were discerned, the
defendant] had no right to insist on a personal colloquy as a
prerequisite to a valid plea withdrawal.... [B]ecause her subsequent
plea of guilty is fundamentally inconsistent with an NGI defense, she
implicitly withdrew the NGI by her own act. So long as the latter plea
was not otherwise deficient ... she has no valid complaint (¶
26) (citations omitted). The court also noted that at the time the
defendant entered the guilty and no contest pleas, the circuit judge had
no reason to doubt her sanity "either at that time or when she committed
the offenses" (¶ 27).
In sum, the court of appeals concluded that "[c]ourts engage in
personal colloquies in order to protect defendants against violations of
their fundamental constitutional rights. Neither the federal
constitution nor our state constitution confers a right to an insanity
defense or plea. The court therefore had no obligation to personally
address [the defendant] with respect to the withdrawal of her NGI plea"
(¶ 1).
In a footnote the appellate court offered the following advice to
circuit judges: "While we hold that a personal colloquy is not required
to withdraw an NGI plea, we believe it is nonetheless advisable for
trial courts to engage in personal colloquy for at least two reasons:
First, it helps satisfy the court that the defendant is aware and alert
as to what is going on. Second, the record is protected from later
ineffective assistance of counsel claims where a convicted defendant
might assert that counsel never discussed the NGI withdrawal" (¶ 27
n.5).
Sentencing - Erroneous Information About Prior
Convictions
State v.
Tiepelman, 2005 WI App 179 (filed 14 July 2005) (ordered
published 31 Aug. 2005)
The defendant, who had received a lengthy sentence, brought a
postconviction motion seeking resentencing. He claimed that the judge
imposed the sentence under the mistaken belief that the defendant had
more than 20 prior convictions, when in fact he had only nine. The
defendant did not dispute the occurrence of any of the underlying
conduct considered by the court. The trial judge acknowledged that his
reference at sentencing to "over twenty prior convictions" was wrong but
went on to explain that when he fashioned the sentence, he was looking
at the defendant's "well-established pattern of criminal behavior" and
that such behavior was not disputed. The judge denied the motion for
resentencing. In a decision authored by Judge Lundsten, the court of
appeals affirmed.
A defendant who asks for resentencing on the ground that the court
relied on inaccurate information must show both that the information was
inaccurate and that the court relied on it. The defendant carries the
burden of proving inaccuracy of the information and prejudicial reliance
by the sentencing court by clear and convincing evidence. Once a
defendant has done so, the burden shifts to the state to show that the
error was harmless. An error is harmless if there is no reasonable
probability that it contributed to the outcome (see ¶ 6).
The appellate court concluded that the defendant failed to carry his
burden of showing that the sentencing judge prejudicially relied on
inaccurate information. The court said that "the record supports the
trial judge's view that it was the defendant's prior conduct that
mattered, not the number of his prior convictions" (¶ 8).
Said the court, "[c]onviction information is normally used by
sentencing judges simply as one means of determining whether a defendant
has previously engaged in criminal conduct. If, for example, a defendant
admits to three prior bank robberies, but only one of those robberies
resulted in a conviction - perhaps because of a plea agreement - the
sentencing judge typically considers the defendant's actual behavior,
not the number of convictions, when assessing his or her character and
dangerousness. It is the defendant's prior behavior that
logically informs a judge of the defendant's character or propensity to
commit crimes, not whether that behavior is proven at sentencing by
means of a conviction record" (¶ 9).
In this case the appellate court was satisfied that the record
establishes that the sentencing judge did not prejudicially rely on the
number of prior convictions but instead relied on what the judge
characterized as the defendant's "`well-established pattern of criminal
behavior'" (id.).
Speedy Trial - Successive Prosecutions - Determining Length
of Delay
State v.
Urdahl, 2005 WI App 191 (filed 14 July 2005) (ordered published
31 Aug. 2005)
On April 16, 2001 the state charged the defendant with numerous
offenses arising out of an incident that occurred on April 13, 2001. The
charges were dismissed on Aug. 8, 2001, when the state's witnesses did
not appear for the preliminary hearing. The state recharged the
defendant on Oct. 3, 2001. After numerous delays, a trial was scheduled
for Dec. 19, 2003. However, the trial was adjourned after the court
granted the defendant's motion to discharge his attorney. Acting through
new counsel the defendant filed a motion to dismiss on the ground that
he had been denied a speedy trial. The motion was heard and denied in
January 2004. The case concluded with sentencing in February 2004.
The defendant appealed, arguing that the delay in bringing him to
trial in the second prosecution violated his right to a speedy trial
under the Sixth Amendment to the United States Constitution and article
I, section 7 of the Wisconsin Constitution. A key factor in analyzing
speedy trial claims is the length of the delay. The parties disagreed on
how that calculation should be made here. The defendant argued that the
length of delay should be calculated from the date of his original
arrest (April 13, 2001) to the date he was scheduled for trial in the
second action (Dec. 19, 2003), including the time from the dismissal of
the first action until the filing of the second. The state argued that
the speedy trial right did not attach until the filing of the complaint
in the second action on Oct. 3, 2001.
In a decision authored by Judge Vergeront, the court of appeals
concluded that, under United States v. MacDonald, 456 U.S. 1
(1982), the time between the Aug. 8, 2001 dismissal of the initial
charges against the defendant and the filing of the second complaint on
Oct. 3, 2001 is not included in determining whether the defendant's
constitutional right to a speedy trial was violated (see ¶
20).
The court noted different approaches among jurisdictions as to
whether the predismissal time period (here, the time between the arrest
on April 13, 2001, and the dismissal on Aug. 8, 2001 of the first
prosecution) should be counted in analyzing the length of delay for
speedy trial purposes. It indicated a reluctance to decide which
approach to follow in the absence of fuller briefing by the parties. The
court concluded that it need not make that decision in this case
because, even if the court determined that the predismissal time period
should be initially included, only two weeks of it would be assessed
against the state when the reason for the delay is factored in. To
resolve the defendant's appeal, the court assumed without deciding that
it should include the predismissal time period (see ¶ 24).
Applying all the factors that pertain to the speedy trial calculus, the
court concluded that the defendant's right to a speedy trial was not
violated (see ¶¶ 26-37).
Child Witnesses - Videotaped Statements -
Confrontation
State v.
James, 2005 WI App 188 (filed 6 July 2005) (ordered published
31 Aug. 2005)
James was charged with several counts of sexually assaulting a child
based on incidents involving two children. Before trial, the state gave
notice that it would introduce at trial videotaped statements made by
the children pursuant to Wis. Stat. section 908.08. The state also
declared that "[i]t would play the videotapes, perhaps conduct an
abbreviated direct examination, and then produce the children for
cross-examination at James' request." The defendant moved to exclude
this evidence on the basis that his constitutional rights, as defined in
Crawford v. Washington, 541 U.S. 36 (2004), would be violated
(see ¶ 3).
The circuit court sustained the defense objection that this procedure
violated James' rights. First, "§ 908.08(3)(e) imposed a
prerequisite to the court's admission of videotaped statements: it
charged the court to determine that the statements, if admitted, would
not `deprive any party of a fair opportunity to meet the allegations
made in the statements.' The court concluded that it could not make such
a determination prior to live testimony because it would not know
whether a Crawfordviolation would occur until meaningful
cross-examination had taken place" (¶ 5). The circuit court also
looked to its authority under Wis. Stat. sections 904.03 and 906.11 to
regulate evidence.
The court of appeals, in an opinion written by Judge Brown, reversed.
"We appreciate the trial court's concern with administering justice in a
fair and efficient manner and its desire to do so proactively without
waiting until it is too late to avert prejudice. However, it is apparent
to us that underlying the court's decision was the premise that this
statute had no legitimate purpose and was not a proper exercise of
authority.... We conclude that the court's rationale was motivated
by the belief that the legislature had improperly usurped the court's
authority, in violation of the constitutional separation of powers
doctrine" (¶ 14).
The court of appeals held, however, that section 908.08 is
constitutional. First, "the order of evidence prescribed in the statute
furthers the protective purpose of the statute and therefore
legitimately qualifies as an exercise of legislative power to regulate
for the welfare of the public" (¶ 18). Second, section 908.08 falls
"within the vast region of shared power between the judiciary and the
legislature" (¶ 19). "Although the statute requires the court to
admit the videotapes once the court has satisfied itself that certain
prerequisites have been met and deprives the court of the right to
control the order in which this evidence is to be taken, it in no way
fetters the fact finder's consideration of the evidence presented. The
statute does not determine the result of any case before the court and
therefore leaves the judiciary's authority fully intact with respect to
its most important function" (¶20). Wisconsin courts have upheld
other statutes that actually exclude evidence; in contrast, section
908.08 affects only the "order and presentation of admitted evidence"
(¶ 21).
"Finally, we observe that the mere hypothetical possibility that one
or both children will `clam up' on the stand does not operate to void an
otherwise constitutional exercise of legislative power. Speculation
cannot overcome the presumption in favor of a statute's constitutional
validity. The State has promised to produce the children for
cross-examination upon James' request. Nothing in the record
demonstrates that either girl is disinclined to testify or that the
State has in bad faith made an empty promise. The notion that James
cannot expect a full and exacting cross-examination lacks any factual
basis" (¶ 22).
Top of page
Insurance
Duty to Defend - Defamation
Baumann v.
Elliott, 2005 WI App 186 (filed 20 July 2005) (ordered
published 31 Aug. 2005)
Baumann and his security firm filed a complaint against Elliott,
Elliott's security firm, and Elliott's insurer. The complaint set forth
three claims: 1) tortious interference with contracts and prospective
contracts, 2) defamation, and 3) threats to injure or accuse of a crime.
After Elliott tendered his defense to the insurer, the latter sought a
declaration that it had no duty to defend or to indemnify. The circuit
court granted summary judgment in favor of the insurer on the grounds
that it had no duty to indemnify or to provide its insured a defense in
an action "for defamation of character because the policy required an
`occurrence' to trigger coverage for `personal injury'" (¶ 1).
The court of appeals, in an opinion written by Judge Brown, affirmed.
Case law mandates that in coverage disputes, the court looks only to the
four corners of the complaint itself. "[T]he duty to defend is
`predicated on allegations in a complaint which, if proved, would give
rise to recovery under the terms and conditions of the policy'"(¶
7). Yet, once the coverage issue is decided, "coverage is no longer open
to debate. An insurer need not defend a suit in which it has no economic
interest"
(¶ 10). Moreover, even assuming the circuit court "should have
limited its duty-to-defend analysis to the `four corners' of the
complaint, it reached the correct result. Elliott concedes that the
`occurrence' prerequisite to personal injury coverage purports to afford
coverage only for negligent defamation. No fair reading of this
complaint reveals such a claim. Rather, the allegations assert
intentional, willful, malicious defamation" (¶ 12). The court of
appeals also considered the plaintiff's "prayer for relief," despite
case law that holds that the ad damnum clause is not a "substantive
part" of the complaint (¶ 16).
Finally, the court of appeals held that its construction of the
policy did not render coverage "illusory." "Because the parties agree
that the Cincinnati policy purports to offer coverage for negligent
defamation, we conclude that the `occurrence' requirement in the policy
precludes coverage only for defamation in the following circumstances:
(1) ordinary cases where the plaintiff proves express malice or (2)
conditional privilege situations where the plaintiff proves express
malice upon a showing of fault exceeding negligence. It does
not deny coverage where a plaintiff proves that Elliott abused a
qualified privilege by failing to exercise due care, nor does it deny
coverage where a plaintiff can recover without showing express malice,
i.e., where Elliott does not put conditional privilege at issue. Thus,
we deem the policy nonillusory" (¶ 24).
Statute of Limitation - Date of "Loss"
Bronsteatter & Sons
v. American Growers Ins. Co., 2005 WI App 192 (filed 26 July
2005) (ordered published 31 Aug. 2005)
The Bronsteatter company, which engages in cash crop farming,
purchased a farm owner's insurance policy that covered damage caused by
vandalism. Unaware that its 12-row corn planter had been vandalized,
Bronsteatter planted more than 1,000 acres of corn with the damaged
planter, which overfertilized the seeds and killed them. The planting
occurred on May 17 or 18, 2002. On June 3, 2002, Bronsteatter reported
the damage to the police and the insurer. On June 4, 2003, Bronsteatter
filed this lawsuit against the insurer for not paying its damages. The
circuit court granted summary judgment in favor of the insurer on the
ground that Wis. Stat. section 631.83(1)(a) requires the action be
commenced within 12 months after the inception of the loss.
The court of appeals, in an opinion written by Judge Peterson,
affirmed. The parties agreed that the policy was governed by Wis. Stat.
section 631.83(1)(a), which provides that an action on a farm insurance
policy must "be commenced within 12 months after the inception of the
loss." But they disagreed as to what date constituted the inception of
the loss. Bronsteatter argued that "its loss did not occur until it
completed its corn harvest in December 2002, making its June 4, 2003,
complaint timely." The insurer argued that the loss occurred on the date
of the actual vandalism, which occurred sometime in May 2002 (before the
police report). And the "circuit court took a third approach, fixing the
inception of the loss at the time of planting" (¶ 7).
The court of appeals rejected Bronsteatter's argument because "it
ignores the word `inception.' While the damage or loss Bronsteatter
seeks recovery for is reduced crop yield, we agree with the circuit
court that the inception of that loss was the moment the overfertilized
seeds were planted with the vandalized corn planter. That Bronsteatter
did not know what the actual yield from the field would be, and
therefore could not exactly value that loss, does not mean that it was
not damaged at the time of planting" (¶ 10).
Bronsteatter also unsuccessfully argued that the statute contemplated
a distinction between "the damage date" and "the date of the
insured-against peril or `event'" (¶ 11). The court of appeals held
that the purported distinction had no support in the case law and
"hinge[d] on the same premise [the court] rejected above: that it
suffered no damage or loss until the completion of the crop harvest"
(¶ 12).
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Torts
Breach of Fiduciary Duty - Statute of
Limitation
Zastrow v. Journal
Communications Inc., 2005 WI App 178 (filed 28
July 2005) (ordered published 31 Aug. 2005)
This action involved a trust agreement under which employees of
Journal Communications and its subsidiaries can acquire units of
beneficial interest in the stock of Journal Communications. After a
trial to the court, the circuit court found that the trustees had
negligently failed to fulfill their fiduciary duty, by failing to
disclose to a certain group of former employees the availability of a
longer period for selling back their units if they chose to retire when
the subsidiary that employed them was sold. The court entered judgment
in favor of the employees. This appeal followed.
The dispositive issue before the appellate court was whether the
circuit court correctly decided that the action was governed by a
six-year statute of limitation rather than a two-year statute of
limitation. The plaintiffs argued that either Wis. Stat. section 893.52
(Action for Damages for Injury to Property) or section 893.43 (Action on
Contract) applies to a breach of fiduciary duty claim. The defendants
argued that the section 893.57 two-year statute of limitation for
intentional torts applies. The circuit court applied the six-year
statutes on the ground that the claim involved a negligent rather than
intentional breach of duty.
In a decision authored by Judge Vergeront, the court of appeals
reversed. It concluded that under Beloit Liquidating Trust v.
Grade, 2004 WI 39, 270 Wis. 2d 356, 677 N.W.2d 298, section 893.57
applies to breach of fiduciary duty claims. This statute provides that
"[a]n action to recover damages for libel, slander, assault, battery,
invasion of privacy, false imprisonment or other intentional tort to the
person shall be commenced within 2 years after the cause of action
accrues or be barred."
In Beloit Liquidating, the supreme court characterized a
breach of fiduciary duty as an intentional tort and applied the two-year
statute of limitation for intentional torts, even though the conduct
alleged was that the defendants negligently allowed certain contracts
and failed to keep adequate accounts, act prudently, and disclose
losses. Here, the court of appeals said that it could not see how the
conduct involved in Beloit Liquidating was any more
"intentional" than the conduct forming the basis of the Zastrow
plaintiffs'claim, i.e., the failure of the defendants to make certain
disclosures as described above. Said the court, "[w]e conclude that the
supreme court's decision in Beloit Liquidating is controlling
and requires the application of the two-year statute of limitations in
Wis. Stat. § 893.57 to the ... employees' breach of fiduciary
duty claims that the court decided in their favor. From the standpoint
of the intentionality of the conduct, we see no significant distinction
between that alleged in Beloit Liquidating and the failure to
disclose information that the circuit court found to be a breach of
fiduciary duty here" (¶ 28).
The plaintiffs also argued that the two-year statute for intentional
torts is inapplicable to this case because, by its terms, it applies to
an intentional tort "to the person," whereas their injuries are
economic, that is, injury to their property. The court of appeals
disagreed, again relying on Beloit Liquidating. "[T]he injury
in Beloit Liquidating was not bodily injury but was economic
injury, that is, injury to personal property, as is the injury in this
case" (¶ 28).
Finally, the plaintiffs did not provide and the appellate court could
not find any authority that would support applying a different statute
of limitation to a breach of fiduciary duty claim in a situation, such
as the one here, in which the fiduciary relationship arises out of a
trust agreement or employee stock purchase agreement (see
¶ 28).
Cause-in-Fact - Public Policy
Cefalu v. Continental
W. Ins. Co., 2005
WI App 187 (filed 6 July 2005) (ordered published 31 Aug. 2005)
A truck driven by Theys overturned while traveling on a highway and
spilled its load of limestone. Police responded, closed the roads, and
set up flares. Wojnowski, a fire chief, responded in his department's
fire truck and turned off the siren as he approached the intersection.
The fire truck struck a car driven by Cefalu as it approached the scene.
A stopped garbage truck apparently had blocked the line of vision
between the two vehicles. Wojnowski and his insurer contended that
Theys' rollover accident was a cause-in-fact of Cefalu's injuries. The
circuit court disagreed.
The court of appeals, in an opinion written by Judge Anderson,
affirmed. "The test of cause-in-fact is whether the negligence was a
`substantial factor' in producing the injury. `The phrase, substantial
factor, denotes that the conduct has such an effect in producing the
injury as to lead a reasonable person to regard it as a cause, using
that word in the popular sense. There may be several substantial factors
in any given case.' To prove that a tortfeasor's negligence was a
substantial factor in producing a plaintiff's injuries, it must be shown
that there was an `unbroken sequence of events' where the negligence of
the tortfeasor was actively operating at the time of the accident which
produced the plaintiff's injury" (¶ 11).
The court of appeals distinguished other cases: "[U]nlike the drivers
in [three cited cases], Theys' negligence was not actively operating by
the time of the Cefalu-Wojnowski collision and was not a substantial
factor in producing the damages Cefalu sustained as a result of the
collision. This is the only reasonable conclusion that can be drawn from
the facts presented. Accordingly, we conclude the circuit court properly
ruled, as a matter of law, that Theys' rollover accident was not a
cause-in-fact of the Cefalu-Wojnowski collision and Cefalu's resulting
injuries" (¶ 19). Finally, the court said that even if it held that
Theys' negligence was a cause-in-fact, public policy considerations,
especially remoteness, precluded Theys' liability for Cefalu's injuries
(see ¶ 20).
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