Wisconsin Supreme Courts Affirms Mere Commercial Availability of Coverage Insufficient to Prove Claim of Negligent Procurement Against Agent

We previously posted on the state court of appeals’ decision in Emer’s Camper Corral, LLC v. Alderman, 2019 WI App 17, in which the court reviewed proofs necessary to proceed on a claim of negligent procurement of insurance coverage.  The state supreme court has now affirmed the court of appeals’ decision.

In Emer’s Camper Corral, LLC v. Alderman, 2020 WI 46, the plaintiff camper dealer sought insurance to cover hail damage to its inventory of campers.  The plaintiff had historically procured such coverage for a deductible of  $500 per camper through the defendant insurance agent.  In 2011, the plaintiff’s inventory suffered $100,000 worth of hail damage.  Its insurer at the time paid the claim and renewed coverage for 2012.  Another $100,000 of damage occurred in 2012, precipitating the insurer’s decision to non-renew the plaintiff’s coverage.

The defendant agent procured a $5,000 per camper deductible for the plaintiff for 2013, an expected increase in terms due to the plaintiff’s recent claims history.  The agent said, however, that should the plaintiff remain claims-free for a couple years, there may be an opportunity to secure coverage for a deductible closer to $1,000 per camper.

The plaintiff went claims-free the following year, and the defendant agent responded by stating he was able to procure coverage at a deductible of $1,000 per camper with a $5,000 aggregate deductible limit.  However, the defendant agent’s representations were inaccurate – the new coverage actually provided a per camper deductible of $5,000 and no aggregate limit.

Towards the end of the 2014 policy period, the agent presented two renewal options to the plaintiff:  the “same” $1,000 per camper deductible and $5,000 aggregate deductible limit with the plaintiff’s current insurer, and another insurer’s offer of a deductible of $1,000 per camper.  While contemplating these potential coverages, the plaintiff suffered hail damage to 25 campers, and submitted the claim to its then-current insurer.  In submitting the claim, the plaintiff learned the terms of its hail damage coverage were actually $5,000 deductible per camper and no aggregate limit.

The plaintiff sued the agent for $120,000, the difference between the total damages claim and the $5,000 aggregate deductible limit the plaintiff believed it had paid for.

The agent moved for a directed verdict, arguing the plaintiff failed to show a causal link between the plaintiff’s damages and the agent’s failure to procure coverage with the desired terms.  After considering evidence from the plaintiff’s own expert that the plaintiff would not have been able to procure coverage with the desired terms based upon its claims history, the court granted the directed verdict, finding no causation where the plaintiff did not prove it would have been eligible for the more desirable coverage terms, even though such coverage terms may have existed generally.

As noted, the court of appeals affirmed the trial court’s decision.

The supreme court’s review focused on the third element of the traditional negligence case:  did the plaintiff adduce any evidence (the standard to survive a directed verdict) showing a causative link between the agent’s negligence and the plaintiff’s alleged damages.  The plaintiff argued its actual insurability was irrelevant, and that it only need prove its desired coverage terms were commercially available in the market.  In other words, the plaintiff argued it need only show the desired terms of coverage were generally available in the market, and not that the desired terms could have actually been procured by the plaintiff specifically.

In the alternative, the plaintiff argued, damages were provable based upon the idea that had the plaintiff known the defendant agent was not able to procure coverage on the so-called desired terms, the plaintiff would have changed its business practices to mitigate the potential for hail damage (like providing additional physical cover for campers, not purchasing additional campers for retail, etc.).

The court reminded that the test for causation is whether the alleged conduct is a substantial factor in producing the plaintiff’s injury.  Would the harm have occurred even with the alleged misconduct?

The general commercial availability standard championed by the plaintiff is a necessary component of the causation analysis, but it is not sufficient in and of itself.  Any given policy’s coverage depends upon the circumstances specific to the prospective insured.  The coverage, terms, and premium depend upon the individual characteristics of the prospective insured; generally, insurance coverage is not available to each and every requesting party without regard to their insurability.

So while commercial availability of an insurance coverage is certainly necessary for a negligent procurement claim like the plaintiff’s, it does not complete the analysis.  The plaintiff had to also prove it could have qualified for the commercially available coverage.  If it could not so qualify, it would not be insurable, regardless of the agent’s negligence.  Thus, the agent’s negligence here was not a substantial factor in producing the plaintiff’s injury, and thus did not provide proof for the causation element of the negligence claim.

The plaintiff also contended it could prove causation through its argument of detrimental reliance.  It would have acted to alleviate its exposure to hail damage if it knew it was not going to have the insurance coverage it sought.  This theory of causation would be independent of any insurability test and thus would allow liability against the defendant agent regardless of whether coverage existed that could have actually insured the plaintiff.

While the supreme court did not foreclose the possibility of the plaintiff’s theory of detrimental reliance, it pointed out the plaintiff offered no evidence from the record showing it would have changed its business conduct had it known about its un-insurability.

Specific Time Period Unnecessary to Establish Unsafe Condition Under Safe Place Statute — Nature of Condition and Business Will Determine if Claim Proceeds.

In Correa v. Woodman’s Food Market, 2020 WI 43, the Wisconsin Supreme Court clarified that to proceed on a claim of an unsafe condition under the safe place statute, a plaintiff need not show evidence sufficient to determine when the condition first existed.  Rather, the court explained the plaintiff need only show evidence sufficient to establish the defendant had notice or should have had notice of the unsafe condition and failed to respond to the condition in a reasonable fashion.

The plaintiff injured his wrist when he slipped and fell on an unknown substance in an aisle at the defendant grocery store.  Not only was the substance unknown, but the length of time the substance was on the floor was unknown.  Much of the oral argument focused on the 90 minutes of security video showing nothing indicating the store should have responded to this aisle to clean anything up before the plaintiff fell.  Nonetheless, based upon the plaintiff’s slip and fall in that area, the plaintiff’s wiping of a substance off his shoe after he fell, an employee’s testimony that there may have been drops of a substance in that area visible right after the fall, and the video footage that showed no indication of the origin of the unknown substance for approximately 90 minutes (implying the substance may have been on the floor for more than 90 minutes), the court found reasonable inferences supporting the plaintiff’s theory of liability – that the store had sufficient time to be on notice of and respond to the unsafe condition.

The import of this decision is that whether an alleged unsafe condition under the safe place statute will survive summary judgment or a directed verdict will depend on whether the plaintiff can establish, based upon the nature of the unsafe condition and the nature of the defendant’s business, whether the defendant had notice of the condition or should have had notice such that a response to the condition should have occurred under reasonable circumstances.  This means there is no bright line rule for how long an alleged unsafe condition has to last for a defendant business to be considered on notice of it; the particular amount of time will depend on the circumstances, like the nature of alleged condition and the nature of the business and its practices.

Prospect of Contributory Negligence Does Not Protect Against Section 628.46 Interest

Wisconsin Statute § 628.46 is an important statute in Wisconsin insurance law – it provides that an insurer is subject to penalty interest for liability on claims “if not paid within 30 days after the insurer is furnished written notice of the fact of a covered loss and of the amount of the loss . . .”  Importantly, the statute also provides that “[a]ny payment shall not be deemed overdue when the insurer has reasonable proof to establish that the insurer is not responsible for the payment . . .”  So, what is this “reasonable proof”?

In Casper v. American International South Insurance Company, 2015AP2412 (Ct. App. Dist. I, May 16, 2017), the court reviewed the application of § 628.46 under circumstances which indicated liability would likely be apportioned between the plaintiffs and defendants at trial, meaning the defendant insurer was considered to have a liability defense at trial.  The plaintiffs were severely injured in an auto accident and made a demand in 2007 for the defendants’ $1,000,000 policy limits, which the defendants ultimately tendered in 2012.  The plaintiffs’ medical bills at the time of their demand exceeded $643,000, and claimed future treatment totaled more than $7,000,000.

The plaintiffs also sought almost $700,000 in interest under Wis. Stat. § 628.46 for the time period between their demand and the ultimate tender.  The defendants argued, however, that payment had not been due under Wis. Stat. § 628.46 because they had a reasonable defense – there was evidence that the plaintiff driver had not proceeded normally through the intersection upon a green light and thereby may have contributed to causing the accident.

In reviewing Kontowicz v. American Standard Ins. Co. of Wisconsin, 2006 WI 48, the court explained that for third-party claims to trigger the interest provision of Wis. Stat. § 628.46, the claimants had to show “that there is ‘no question’ of the insured’s liability; second, that there is a ‘sum certain’ of plaintiffs’ damages; and third, that the insurer received written notice of liability and the ‘sum certain’ damages.”  Regarding the first prong (which is the focus here) – interest would not be triggered “if the insurer has reasonable proof it is not responsible,” which was defined in Kontowicz as “that amount of information which is sufficient to allow a reasonable insurer to conclude that it may not be responsible for payment of a claim.”  Several factors inform this calculus, including whether there are reasonable coverage issues and whether there are high damages compared to relatively lower limits.  Importantly, regarding the latter, “the potential for contributory negligence by a party is not, in itself, sufficient to constitute ‘reasonable proof’ that will defeat an award of interest.”

The defendant driver in Casper admitted that he was under the influence of prescription drugs at the time of the collision and that he neither saw the plaintiffs’ vehicle nor slowed down before the collision.  This, the court reasoned, showed that there was no question of liability on the part of the defendant driver, even though some apportionment could have been possible later at trial.  Based upon the clear liability and amount of claimed medical specials far exceeding the limits, the defendants’ duties under Wis. Stat. § 628.46 were triggered and the penalty interest was found appropriate by the court.

Court of Appeals Holds That Public Policy Does Not Shield Insurer From Potential Liability For Heroin Overdose

A tragic series of events, most of them disputed, led to a recent published decision from the Court of Appeals on insurance coverage issues related to intentional conduct, occurrences, and the application of public policy. See Oddsen v. Henry, 2015AP000765 (recommended for publication).

On February 2, 2010, Jason Oddsen went to a party at a friend’s home. During the course of the party, Oddsen, who was a regular abuser of drugs, consumed a mixture of heroin, methadone, oxycodone, and alprazolam that proved fatal early the next morning. At some point during the evening, Oddsen became incoherent but then regained consciousness. Another party guest, Elizabeth Henry, became concerned and brought Oddsen to her mother’s house sometime between 1:00 a.m. and 1:30 a.m.  It was there that Oddsen “began to show signs of having overdosed.” Oddsen was pronounced dead at the hospital at 7:28 a.m.

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Court of Appeals Rules That “Known Danger” Exception to Governmental Immunity Is Inapplicable to Law Enforcement Investigation of Sexual Abuse

The Wisconsin Court of Appeals recently examined the “known danger” exception to governmental immunity available under Wis. Stat. § 893.80(4). In Recore v. County of Green Lake, 2015AP001301 (recommended for publication) the court held that a police department’s investigation of sexual abuse allegations “falls within a discretionary analysis” and as such is entitled to immunity. It further held that the “known danger” exception cannot apply when no one actually knew that the perpetrator of the abuse was dangerous. Finally, it held that a County’s investigation under Wisconsin’s mandatory reporting law, Wis. Stat. § 48.981, was entitled to immunity.

The facts giving rise to the case are certainly tragic, as they involve the sexual abuse of a minor. In 2011, D.B. was a first-grader in Berlin, Wisconsin. He began to exhibit sexualized behavior toward classmates that was understandably concerning to his school’s principal. The principal contacted the Police School Liaison Officer about the incident and also advised the officer that when questioned about the behavior, D.B. reported that his “Uncle Rob” told him about it and showed him pictures of naked people on his cell phone.

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Prisoner Litigation Reform Act’s Exhaustion Requirement Is Inapplicable When An Inmate Is Not Informed Of The Grievance Process

Failure to exhaust administrative remedies pursuant to the Prison Litigation Reform Act (“PRLA”), 42 U.S.C. § 1997e(a), is a common defense in prisoner civil rights litigation. Federal courts strictly enforce this requirement, and therefore it is often a dispositive defense. However, the Seventh Circuit recently held that an inmate-plaintiff had no duty to follow a corrections facility’s grievance process when the facility failed to inform him of its process. In such instances, an administrative remedy is unavailable. And when an administrative remedy is unavailable, the PLRA’s requirements are inapplicable. See Hernandez v. Dart, No. 15-2493 (7th Cir. 2016).

Hernandez raised Section 1983 claims against the Cook County Department of Corrections (“CCDOC”) including an allegation of excessive force. A car accident in 2012 rendered Hernandez a quadriplegic. He has no use of his legs, limited use of his arms, and cannot write. On the day he was taken into custody, Hernandez was hospitalized for treatment of pressure wounds that had developed during his stay at a nursing home. Pursuant to Cook County Sheriff’s Office policy, one of his hands and one of his feet were shackled to the hospital bed. Hernandez orally complained to correctional and hospital personnel, as he believed it stunted his recovery by preventing him from moving so his sores could heal.

CCDOC’s Inmate Information Handbook sets forth a grievance process, which requires inmates to file a written grievance within fifteen days of the alleged incident. Once a response is received, the inmate has 14 days to appeal the decision. However, Hernandez never received a copy of the Handbook. Nor did anyone from CCDOC tell Hernandez about the grievance process. Rather, Hernandez claimed that he later learned about the process from fellow inmates after being discharged from the hospital.

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Defamation Down Under: Online Publications and Personal Jurisdiction

Recently, in Salfinger, et al. v. Fairfax Media, Ltd., et al., the Wisconsin Court of Appeals considered “whether a Wisconsin Court may exercise jurisdiction over foreign defendants whose only real connection to the State of Wisconsin is in having published an article online that is ostensibly available to anyone in the world and that also provides for targeted advertising based upon the user’s location and interests.”  ¶ 11.

Plaintiff Roderick Salfinger, an Australian claiming to be a resident of Shorewood, WI, brought a defamation claim against the Sydney Morning Herald for an article it ran about the family behind Yellow Tail wine, which noted his connection to them and contained other individuals’ descriptions and opinions about him which were “less than flattering.”  ¶¶ 2-4.  Of primary concern to the plaintiff was a statement that he “faces prosecution in the [United States] after allegedly producing a revolver at his daughter’s wedding.”  ¶ 4.

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Boy is it Cold! How is your Automatic Fire Sprinkler System?

A recent publication by NFPA, Hall, J. R. (2010). “U.S. Experience with Sprinklers and Other Automatic Fire Extinguishing Equipment” reports the analysis of data from a single calendar year reveals approximately 120 inadvertent automatic fire sprinkler discharges per day.  Inadvertent discharges result in millions of dollars in damage per year.

Sprinklers inadvertently discharge for a number of reasons, the most common of which are: (1) non-fire related overheating; (2) freezing; (3) mechanical damage; (4) corrosion; (5) sabotage; and (6) component manufacturing defects. Blum, A., Long, R.T., Dillon, S., “Investigating Inadvertent Automatic Fire Sprinkler System Discharges,” Forensic Engineering, 2012.  Commercial properties are most likely to see an inadvertent discharge, followed by manufacturing facilities, homes and warehouses.  Id.

Critical aspects of evidence collection include the discovery and collection of each piece of the failed component. Blum, et al. at 530.  As usual, preparation for this type of investigation is critical.  As much as possible, be prepared in advance to look for the right components.  Consult the as-built drawings.  Look at the spare heads in the spare sprinkler box, and study the appearance of the activation elements, caps and seals.  Try to get there prior to the commencement of cleanup efforts.  If they have begun before you are invited, do your best to document what has been cleaned up and by whom, as the duty to preserve evidence attaches at the time a claim is evident.  Preservation of fracture surfaces is critical, as those surfaces often tell the story of the failure.

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Falsely Induced “As-Is” Clause Will Not Defeat Statutory Claim of Deceptive Representation

A recent decision by the Court of Appeals examined how Wisconsin’s deceptive representation statute, Wis. Stat. § 100.18(1), applies to “as-is” sales and contractual exculpatory clauses. While sellers may rely on “as-is” language to avoid liability for problems or defects that are discovered down the road, this new decision confirms that, just as with common law claims for misrepresentation, a falsely induced “as is” clause does not preclude liability under section 100.18.

In Fricano v. Bank of America NA, 2015AP20 (recommended for publication), the bank acquired a home in foreclosure. After acquiring the home, the bank’s real estate agent discovered that the property had suffered severe water damage. The real estate agent emailed the bank’s asset manager photos of the damage, which included pooling water and fallen ceilings. The bank’s asset manager said that “quick clean up would save the property from any mold issues.”

However, the remediation and repair was not completed for seven months and the real estate agent found the work to be unsatisfactory. The real estate agent had warned the bank throughout the process that mold could develop, although by the time the remediation was complete and the house was listed, the real estate agent had not seen or smelled any signs of mold. Nevertheless, the house was listed and the plaintiff set up a showing. Her real estate agent took her through the home and noticed discoloration in the basement that looked like mold. Although they noticed mold elsewhere in the basement, they did not see any evidence of mold anywhere else in the home.

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Addressing Claims after a Product Rollout (I’m looking at you, Hoverboard)

My news feeds this morning are alive with the re-posting of tweets and other social media blasts related to injuries suffered by the recipients of, generically, the Hoverboard. These products remind me of the rollout of the Segway, and the inevitable claims and lawsuits for injuries that followed a truly revolutionary concept in human transportation.

The Segway was expensive, though. Really expensive.  And they have handles.

Hoverboards, on the other hand, are running about $400. Price, and a steady stream of media stories leading up to Christmas made the product a hot gift this year.  A large sales volume of a relatively revolutionary concept in personal travel (without handles!) over a short time will mean that these manufacturers will be inundated with claims, and attempts to certify class action lawsuits, in the coming year.

Responding to those claims, evaluating accidents their causes, categorizing injuries and organizing the response to the inevitable claims will directly affect the bottom line of these manufacturers and their insurers over the coming several years.

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