Wisconsin Legal Update: Case Law

WDC Journal Edition: Winter 2007
By: Bernard T. McCartan - American Family Mutual Insurance Co.

Medical Malpractice; Wrongful Death; Standing of unborn child to bring suit.

Bursa v Mercy Health Systems, Inc.,

2007 WI App 166; 737 N.W.2d 1

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. Here, the deceased was allegedly misdiagnosed for colon cancer. After the deceased learned of his colon cancer, he and his girlfriend married and conceived a child. The child was born four months before the deceased died. The court of appeals held that a question of fact existed as to the date of injury, and allowed the child’s claim for loss of society to go to trial.

This principle also applies to claims for the wrongful death or serious injury to a 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 N.W.2d 181

A seasonal dwelling which the insured rented to a series of tenants over a period of more than two years before a fire and at which the insured stayed for only nine days during that time was not used “primarily” as a dwelling by the insured for purposes of invoking the Wisconsin valued policy law, § 632.05(2), Wis. Stats. Accordingly, the insurer of the property owed repair cost, but not the face value of the policy when the property was damaged by fire.

Workers Compensation; Payments of TTD to terminated worker

Emmpak Foods, Inc. v LIRC,

2007 WI App 164; 737 N.W.2d 60

An employee fired for repeated violation of work rules while on light duty after a work-related injury could collect TTD payments for the full period of his work-related disability, even after being fired. The workers compensation statute has no exception to eligibility for TTD payments for employees fired for violation of workplace rules. Although the claimant’s wage loss was not caused solely by his work-related injury, the injury was one of the causes. That was sufficient to satisfy the statute.

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 N.W.2d 578

Frontier sold property and equipment to United. In the sales contract, Frontier warrnted (a) that it had never used the property in such a way as to pollute groundwater and (b) that it had never released pollutants. Frontier promised to indemnify United for any breach of warranty arising out of environmental liability. Fifteen 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. Frontier’s insurers denied coverage claiming there was no occurrence and on the following exclusions: (a) owned property, (b) contractual liability, and (c) pollution.

The court of appeals held Frontier’s contamination of the soil and groundwater was an occurrence that triggered coverage. The owned property exclusion applied to soil contamination but did not apply to the groundwater contamination because groundwater 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 agreed to deliver non-polluted land. The pollution exclusions contained in some of the policies applied.

Coverage; Late Notice of lawsuit; Prejudice to Insurer

International Flavors & Fragrence v Valley Forge Insurance Co.,

2007 WI App 187, 738 N.W.2d 159

For insurance coverage to be denied on the ground of late notice of a claim, actual prejudice to the insurer must be shown. If the late notice is more than 12 months, a rebuttable presumption of prejudice arises. §§631.81 and 632.26, Wis. Stats. 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. Here, the insurer learned of the litigation three years after it was commenced but 13 months before the first of several trials. The court of appeals held that since the insurer had 13 months before the trial of the first case that would expose its policy and it failed to participate in the litigation of that case, the court would not find that the insurer had been prejudiced.

Insurance Agent; Duty to procure insurance.

Avery v Diedrich 2007 WI 80, 734 N.W.2d 159

An insurance agent does not have a duty to procure requested insurance coverage until there is an agreement that the agent will do so. Here, the 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 a contractor but did not contact the agent with the appraisal information. Fire destroyed the dwelling and the coast to rebuild was in excess of $250,000. Since the insured’s had not gotten back to the agent with the requested appraisal, the agent had no duty to increase the limits.

The court also summarized the law regarding the duties of 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].’ “[Citing cases.] Agency law does not insulate an insurance agent from liability for his or her torts. [Citing cases.] 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. 2007 WI 80 ¶23

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.” [Citing cases.] The court concluded that “an insurance agent has no affirmative duty under existing Wisconsin law, absent special circumstances, to inform an insured concerning the availability or advisability of UIM coverage.” 2007 WI 80 ¶26

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,” [Citing cases.]; “update the contents limit of the [insureds'] policy or to advise them regarding the adequacy of coverage,” [Citing cases.]; “advise [the insured] to increase the limits of its insurance coverage for personal property,” [Citing cases.]; or “anticipate what liabilities an insured may expect a policy to cover or to identify which exclusions in a policy an insured may deem important,” [Citing cases.]. 2007 WI 80 ¶28

Subrogation; Collateral Source Rule; Reasonable Value of Medical Services; Evidence; Amount of Payment by Health Insurer

Leitinger v DBart, Inc. 2007 WI 84, 736 N.W.2d 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 in full payment of the bill. 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 Supreme Court 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 noted 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 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. 2007 WI 84 48