Wisconsin Legal Update

WDC Journal Edition: Winter 2006
By: Bernard T. McCartan - Associate General Counsel, American Family Mutual Insurance Company

UIM Coverage; Definition of Underinsured Motorist; Impermissible Reducing Clause Under §§ 632.32(4m) & (5)(i), Wis. Stats.
Welin v. American Family
2006 WI 81, ___ Wis. 2d ___, 717 N.W.2d 690 (2006)
Under the specific facts of this case, a UIM carrier’s limits-to-limits definition of “underinsured motor vehicle” was held to be an impermissible reducing clause under Wis. Stats. §§ 632.32(4m) & (5)(i), and was not be enforced to bar UIM coverage. The UIM carrier was required to provide UIM coverage up to its policy limit after reduction for the amount received by the UIM claimant from the tortfeasor’s liability carrier. A tortfeasor had a $300,000 single-limit liability policy that was exhausted by payments to two injured parties. The UIM claimant also had a $300,000/$300,000 UIM policy with a definition of “underinsured motor vehicle” based on a limits-to-limits comparison. The UIM claimant received $250,000 from the tortfeasor’s limit and the other injured party received $50,000. The UIM carrier was required to provide its insured with UIM coverage of up to $50,000, the $300,000 per person UIM limit less the $250,000 payment from the tortfeasor’s liability carrier.
Comment: This decision does not invalidate limits-to-limits definitions of “underinsured motor vehicle” in general. The case presents an unusual fact situation that is not present in the ordinary case in which the UIM limits-to-limits definition of “underinsured motor vehicle” is at issue. Accordingly, Supreme Court expressly limited this decision to its facts.
UM Coverage; Reducing Clause; Unenforceable for Payments to Workers Comp Supplemental Benefits Fund
Teschendorf v. State Farm Ins. Co.
2006 WI 89, 717 N.W.2d 258 (2006)
A reducing clause in a UM policy could not be invoked to reduce UM policy limits by the amount of workers compensation payments made to the Wisconsin Workers Compensation Supplemental Benefits Fund because of the death of a worker who left no surviving spouse or children. The reducing clause could not be invoked because no payments were made to or for the benefit of any survivors. Accordingly, the surviving parents of the worker were allowed to make a wrongful death claim against the UM policy.

Economic Loss Doctrine; Mixed Contract for Goods & Services; Predominant Purpose Test
1325 North Van Buren, LLC v. T-3 Group, Ltd.
2006 WI 94, 716 N.W.2d 822 (2006)
A contract for renovation of a warehouse into condominiums was a mixed contract for goods and services, the predominant purpose of which was the delivery of a finished product, condominiums. Accordingly, the economic loss doctrine applied to bar a tort action to recover damages for construction defects and related problems.
Torts; Damages; Medical Expenses; Unnecessary Medical Services
Hanson v. American Family Mutual Ins.
2006 WI 97, 716 N.W.2d 866 (2006)
In a low velocity impact (LVI) case, where a plaintiff exercised reasonable care in selecting her physician and had surgery for injuries allegedly sustained in the accident in good faith reliance on his advice, she was allowed to collect the medical expenses incurred for the surgery even though the surgery may not have been medically necessary.
Comment: This case appears to remove medical necessity as a criteria for determining whether medical expenses are recoverable in a tort action for bodily injury if the plaintiff exercised reasonable care in selecting a treating physician and followed his/her treatment advice in good faith. However, it does not relieve the plaintiff of having to prove that the underlying injuries and treatment were caused by the accident in question. It is particularly important to remember this distinction when handling LVI cases and other cases in which causation is questionable. If an accident did not cause an injury, there is no causal basis for recovery of medical expenses. In addition, a claimant may not treat indefinitely without reason simply because an injury has occurred. It may still be argued that medical treatment beyond a reasonable healing period was not caused by the accident.
Negligence; Duty to Warn; Public Policy; Duty to Provide Lids for Cups
Kessel v. Stansfield Vending, Inc.
2006 WI App 68, 714 N.W.2d 206 (App. 2006)
Defendant medical center and vending machine company had no duty to warn users of a hot water dispenser that hot water from the machine could cause burns. In addition, public policy considerations preclude imposition of liability on the medical center for failing to supply lids for the cups provided for users of the hot water dispenser.

Small Claims Damage Limit; Contributory Negligence
Bryhan v. Pink
2006 WI App 111, 718 N.W.2d 112 (App. 2006)
In a small claims action, where the court found that the plaintiff and defendant were each 50% responsible for the plaintiff’s damages and awarded $12,000 in total damages, the trial court was correct in reducing the total damage award by the plaintiff’s contributory negligence before applying the small claims jurisdictional cap and awarding judgment for $5000.
CGL Coverage; “Your Product” Exclusion
B&D Contractors, Inc. v. Arwin Window Systems, Inc.
2006 WI App 123, 718 N.W.2d 25 (App. 2006)
The “your product” exclusion in a CGL policy, exclusion k, precluded coverage for damage caused when windows designed, manufactured and sold by the insureds failed because the frames were not strong enough to hold the heavy glass.
UM Coverage; Physical Contact Requirement
DeHart v. Wisconsin Mutual Ins. Co.
2006 WI App 129, 719 N.W.2d 518 (App. 2006)
Under a UM policy, the physical contact requirement for a “hit and run” could be satisfied by a collision between the unidentified vehicle and another vehicle, which forced the insured off the road. A factual dispute as to whether that collision took place must be determined by a trial.
Insurance Agents; E&O Liability; Failure to Procure Requested Coverage
Avery v. Diedrich
2006 WI App 144, 720 N.W.2d 103 (App. 2006)
Petition for review pending.
An insurance agent is not liable for failing to procure insurance coverage requested by an insured where the agent did not agree to procure the requested coverage.
Tort Damages; Medical Expenses; Reasonableness; Collateral Source Rule
Leitinger v. Van Buren Management, Inc.
2006 WI App 146, 720 N.W.2d 152 (App. 2006)
The collateral source rule prohibits introduction into evidence of the amount of bills actually paid by a health insurer to show the reasonable value of the medical expenses incurred by the plaintiff. Where the plaintiff claimed medical expenses in an amount greater than that paid by his health carrier and had no personal liability for amounts beyond what his health carrier had paid, the defendant could not introduce evidence of the amount paid by the health carrier to show that the expenses claimed by the plaintiff were unreasonable.

UIM Coverage; Occupying Vehicle; Vehicle Orientation Test; Motorcycle
Estate of Anderson
2006 WI App 151, 720 N.W.2d 124 (App. 2006)
A UIM policy exclusion that precluded coverage when the insured was occupying a vehicle with less that four wheels did not apply to an insured who laid his motorcycle down during bad weather and who was walking toward his passenger to check on her condition when he was struck by the underinsured motorist. The motorcyclist was not “vehicle oriented” with respect to the motorcycle when he was struck and killed. The passenger confirmed that the motorcyclist was walking toward her when he was hit and witnessed the uninsured motorist strike the motorcycle and then the cyclist.
UIM Coverage; Definition of “Relative”
Bauer v. USAA Casualty Ins. Co.
2006 WI App 152, 720 N.W.2d 187 (App. 2006)
An adult son of the named insured, who was in the U.S. Navy, lived in an apartment at his home port in Mississippi, returned to named insured’s home during his two-week leave periods, and intended to return to Wisconsin after his enlistment was over, was not residing “primarily” with the named insured when he was killed in an automobile accident. Accordingly, the named insured could not make a UIM claim for damages arising from his wrongful death.
Negligent Infliction of Emotional Distress
Camp v. Anderson
2006 WI App 170, --- N.W.2d ---- (App. 2006)
Wisconsin tort law recognizes a claim for negligent infliction of emotional distress if the plaintiff pleads and proves that (1) the defendant was negligent with respect to the plaintiff, (2) the negligence caused the plaintiff’s injury (emotional distress), and (3) the emotional distress is severe. However, even if the elements are proved, the claim can still be barred in an individual case on public policy grounds. In Wisconsin, public policy bars claims for emotional distress that arise from witnessing the death of an animal.
UM Coverage; “Hit and Run”; Physical Contact Requirement; §632.32(4), Wis. Stats.
Progressive Northern Insurance Co. v. Romanshek
2005 WI 67, ___ N.W.2d ___ (2005)
The physical contact requirement recognized in Wisconsin case law interpreting the term “hit and run” in §632.32(4), Wis. Stats. was reaffirmed as the law in Wisconsin. Accordingly, a motorcyclist who laid down his cycle to avoid a collision with an unidentified driver who did not stop, could not make a UM claim under his motorcycle policy because there was no physical contact between him and the “miss and run” vehicle.
Bernard T. McCartan is Associate General Counsel – Regional Legal, for American Family Mutual Insurance Co., Madison, WI, where his practice focuses primarily on insurance claims and coverage issues. He is a 1976 graduate of the Marquette University Law School and is admitted to practice in the State of Wisconsin. Any opinions expressed in this article are solely those of Mr. McCartan and are not necessarily the opinions of American Family Mutual Insurance Co.