Wisconsin Legal Update

WDC Journal Edition: Winter 2007
By: Carmelo Puglisi - American Family Mutual Insurance Co.

Right of action; Standing of unborn child to bring suit

Bursa v Mercy Health Systems, Inc. 2007 WI App 166; 737 NW2d 1

Bursa, the deceased, was allegedly misdiagnosed for colon cancer. After learning of his colon cancer, he and his longtime girlfriend decided to marry and to try to have a child. The girlfriend learned she was pregnant in November, 2003. The child, Joseph, was born July 9, 2004, 4 months before the deceased died. The child brought an action for the loss of the society and companionship of his father.

Dr. Fasano moved for partial summary judgment, asking the court to dismiss Joseph's claim. The circuit court granted the motion, holding that “it would be against public policy to allow a derivative claim for damages for someone who was not conceived and did not exist in any way at the time that the ... initial claim for negligence arose.” The court of appeals reversed because it stated that a question of fact existed as to the date of Bursa’s injury. The right to bring a derivative claim for medical malpractice is determined by the claimant's status at the time of the victim's injury. A child who has been conceived but not yet born at the time of the injury may bring a derivative claim for loss of society and companionship when medical malpractice causes the death of a parent.

This principle applies not only to medical malpractice claims, but to claims for the wrongful death of a parent or serious injury to that parent. A child conceived prior to the injury to the parent and subsequently born alive may recover for loss of parental consortium.

Wis Stat § 632.05(2) Valued Policy Law; Seasonal Dwelling

Cambier v Integrity Mutual Insurance Company 2007 WI App 200; 738 NW2d 181

Cambier, the insured, owned a cabin in Hayward, Wisconsin since 1995. He lived there until 2000 when he moved to Illinois. He and his family spent the majority of the summer at the cabin in 2000, 2001 and 2002. From late 2002 through February 2005, he rented the cabin to 4 different tenants. After an eviction proceeding, the insured drove to Heyward on March 18, 2005. The tenant was not there and he started cleaning the cabin. He left the cabin and while he was away a fire started that damaged the cabin. In the 14 months before the fire, Cambier stayed at the cabin only nine days in 2004, and at least part of that time the stay was in connection with renting the cabin. The only time Cambier was at the cabin in 2005 before the fire, was on the day of the fire, and the purpose of that stay was in connection with the tenancy that had just terminated.

Integrity offered the cost of repair, but the insured believed he was entitled to limit on the policy because of the valued policy law. Wis Stat § 632.05(2) states:

Whenever any policy insures real property that is owned and occupied by the insured primarily as a dwelling and the property is wholly destroyed, without criminal fault on the part of the insured or the insured's assigns, the amount of the loss shall be taken conclusively to be the policy limits of the policy insuring the property.

The Court of Appeals focused on whether the seasonal dwelling was “primarily” used as a dwelling and they concluded that based on the evidence in this case that it was not. As a result, the statute was inapplicable and the insured was only entitled to the cost of repair.

Workers Compensation; Payments of TTD to terminated worker

Emmpak Foods, Inc. v LIRC 2007 WI App 164; 737 NW2d 60

On June 10, 2002, Race, an employee of Emmpak, injured his left wrist on the job. The next day, he returned to work on “light duty” working with his right hand only. On July 21, Race was fired after he worked on a machine without first cutting off the power supply. It was his second violation of the same workplace safety rule and Emmpak's policy mandated termination for a second violation. Since Race had returned to light duty work, there was no wage loss incurred. But once he was terminated, Race suffered a wage loss and claimed he was entitled to temporary total disability. The issue in this case is whether Race is entitled to disability benefits from the date of his termination until January 16, 2003, when his doctor determined that he had reached his healing plateau.

Recognizing that it may seem inequitable to an employer to receive temporary benefits after the employee is discharged for good cause, the court still reasoned that workers compensation is a statutory program and there was no provision that would allow the cutoff of temporary disability benefits as long as the work injury continues to cause disability. The court also stated that the employee’s cause of his wage loss was not solely due to his umemployment, but that his injury also was a cause of his lost wages.

CGL Coverage for Environmental contamination; occurrence; Owned property exclusion; contractual liability exclusion; pollution exclusion.

United Cooperative v Frontier FS Cooperative 2007 WI App 197, 738 NW2d 578

Frontier sold property and equipment to United. In the sales contract, Frontier warranted that it had never used the property in such a way as to pollute groundwater. Frontier also warranted that it had never released pollutants. Frontier promised to indemnify United for any breach of warranty arising out of environmental liability. 15 years later it was discovered there was significant soil contamination and that there would be substantial cost to clean up the soil and assess the damage to the groundwater. United sued Frontier. Frontier’s insurers denied coverage claiming there was no occurrence and on the following exclusions: owned property; contractual liability and pollution.

The court of appeals found there was an occurrence because the event that triggered coverage was Frontier’s contamination of the soil and groundwater and not the refusal to indemnify United pursuant to the contract. The owned property exclusion did not apply because United asserted damage to the groundwater that is owned by the public. Contractual liability was inapplicable because the exclusion deals with hold harmless or indemnification contracts and here Frontier did not assume third party liability of another. Frontier assumed the obligation to deliver non-polluted land. Court ruled the pollution exclusions contained in the policies would apply.

Coverage; Late Notice of lawsuit; Prejudice to Insurer

International Flavors and Fragrence v Valley Forge Insurance Co. 2007 WI App 187, 738 NW2d 159

This case has a very complex procedural history. IFF manufactured the butter flavoring for popcorn. Employees at a plant in Missouri sued IFF when the employees became ill. The Class action lawsuit was started in 2001. In 2004, the Missouri court decertified the class and severed all the suits. Another corporation, Auro Tech, also provided the butter flavoring to the Missouri plant. Auro Tech merged into IFF and in 2004, IFF discovered that Auro Tech had insurance with CNA. CNA denied coverage on late notice.

For insurance coverage to be denied on the ground of late notice, actual prejudice to the insurer must be shown. If the late notice is more than 12 months, then prejudice is presumed.

Prejudice to the insurer is “a serious impairment of the insurer's ability to investigate, evaluate, or settle a claim, determine coverage, or present an effective defense, resulting from the unexcused failure of the insured to provide timely notice.” An insurer suffers prejudice “when it has been denied the opportunity to have input into the manner in which the underlying claim is being defended.

The court of appeals ruled that since the insurer had 13 months before the trial of the first case that would expose a CNA policy and it failed to participate in the litigation of that case then the court would not find that CNA had been prejudiced.

Insurance Agent; Duty to procure insurance.

Avery v Diedrich 2007 WI 80, 734 NW2d 159

Insureds asked their agent to increase the limits on a dwelling from $150,000 to $250,000. The agent would not do so until the insureds obtained an appraisal from a contractor. The insureds obtained a verbal appraisal from the contractor, who agreed that the dwelling should be insured for $250,000. The insureds did not contact the agent with the verbal appraisal. Fire destroyed the dwelling and the coast to rebuild was in excess of $250,000. The issue before the Supreme Court was : If an insured requests an increase in insurance coverage and the insurance agent has not agreed to procure it, does the agent have a duty to procure it? The court concluded that an insurance agent does not have a duty to procure requested insurance coverage until there is an agreement that the agent will do so.

The court gave a summary of the law regarding insurance agents. An insurance agent has a duty to “ ‘exercise reasonable skill and diligence in the transaction of the business entrusted to him [or her].’. Agency law does not insulate an insurance agent from liability for his or her torts.). When an insurance agent fails to act with reasonable care, skill, and diligence in procuring coverage he or she agreed to procure, the agent has breached his or her duty to the insured. In addition to establishing when an insurance agent has a duty, prior cases have also “recognized that, absent special circumstances, an insurance agent's duty to an insured is limited.” Courts have also concluded that in the absence of special circumstances insurance agents do not have a duty to “inform about or recommend policy limits higher than those selected by the insured.

Subrogation; Collateral Source Rule; Evidence of Payment of Health care bills

Leitinger v DBart, Inc. 2007 WI 84, 736 NW2d 1

The plaintiff sued the defendants for injuries sustained at a construction site. The health care provider billed the plaintiff $154,818.51 and the plaintiff’s health care insurer paid $111,394.73 that was accepted by the health care provider. The trial court allowed the defendants to place into evidence the amount that was paid by the health care insurer as evidence of the reasonable value of the services rendered. The plaintiff appealed the trial court’s decision on the ground that the evidence of the insurer’s payment violated the collateral source rule. The Supreme Court agreed with the plaintiff and held that the collateral source rule prohibits parties in a personal injury action from introducing evidence of the amount actually paid by the injured person's health insurance company, a collateral source, for medical treatment rendered to prove the reasonable value of the medical treatment.

The court re-stated that the fact-finder determines the reasonable value of the medical treatment rendered, which is not necessarily the amount actually paid or the amount billed for the treatment. The collateral source rule states that benefits an injured person receives from sources that have nothing to do with the tortfeasor may not be used to reduce the tortfeasor's liability to the injured person. The court reasoned,

If evidence of the collateral source payments were admissible, even for consideration of the reasonable value of the medical treatment rendered, a plaintiff's recovery of medical expenses would be affected by the amount actually paid by a collateral source for medical services. Such a “limitation” on the plaintiff's damages contravenes the view of the collateral source rule stated in Ellsworth and Koffman. Lietinger ¶ 48