Feb. 18, 2022 – The Fifth Amendment’s privilege against self-incrimination does not prevent an insurance company from denying coverage to a homeowner who was unwilling to provide information essential to his claim, the Wisconsin Court of Appeals has ruled.

In Link v. Link, 2020AP1244 (Feb. 1, 2022) the Court of Appeals District III held that the homeowner’s concealing of information and failure to cooperate with the insurance company were sufficient grounds for the insurance company’s denial of coverage.

Lawsuits Over Web Postings​​​

In separate lawsuits, Kerri Link and Jane Does 1-7 alleged that Jay Link posted photographs of them, as well as suggestive and degrading comments, on a members-only fetish website. One lawsuit was filed in Bayfield County Circuit Court and one in Washburn County Circuit Court.

The lawsuits involved claims for invasion of privacy, intentional infliction of emotional distress, negligent infliction of emotional distress, and defamation.

Link sought to have Midwest Family Mutual Insurance (Midwest), the company that issued his homeowner’s policy, cover the claims. But he refused to respond to Midwest’s discovery requests, citing his Fifth Amendment’s privilege against self-incrimination.

Midwest filed for declarations of no-coverage. The company claimed that Link had violated two clauses of the homeowner’s policy – a cooperation clause that required him to cooperate with the company’s investigation, and a concealment clause that required him to truthfully provide the company with all material facts.

The circuit courts granted summary judgment for Midwest. Each court ruled that Midwest had no duty to indemnify or defend Link.

Fifth Amendment No Shield

In an opinion written by Judge Jennifer Nashold, a three-judge appellate panel affirmed the circuit courts (the court of appeals consolidated the appeals).

Judge Nashold explained that Link’s central argument regarding his Fifth Amendment privilege was foreclosed by the holding in State Farm Fire & Casualty Insurance Co. v. Walker, 157 Wis. 2d 459, 459 N.W.2d 605 (Ct. App. 1990).

In Walker, the court of appeals held that the invocation of an insured’s Fifth Amendment privilege did not excuse the insured’s refusal to comply with a concealment clause.

The holding in Walker, Judge Nashold wrote, was based on the scope of the privilege against self-incrimination, and not the wording of the concealment clause. That meant Walker dispatched of Link’s argument that his breach of the cooperation clause was also excused by the Fifth Amendment, Nashold explained.

First- vs. Third-Party Claims

Link argued that Walker should not control because in that case, the insurer was investigating a first-party claim – the insured was seeking indemnification for his or her own loss – while he was seeking defense and indemnity for a suit by a third party.

That distinction was immaterial, Nashold wrote.

“Logically, we discern no reason why the Walker rule should not apply when the insurance coverage claim giving rise to the contractual obligations derives from the insured’s ability for a loss suffered by a third party. The insured’s contractual obligation to assist with the investigation remains the same.”   

‘No Legal Support’

Link also argued that Walker was distinguished by the fact that the insurer’s questioning of the insured occurred before any lawsuit was filed.

That distinction was important, Link argued, because once litigation had begun, his obligation to respond to Midwest’s questions had its source in state statutes related to discovery rather than the policy clauses.

Additionally, Link argued, Midwest could have requested an instruction allowing the jury to draw an adverse inference from the fact he had invoked his Fifth Amendment privilege.

Those arguments lacked any compelling rationale, Judge Nashold explained.

It was true that Midwest may have had more than one legal remedy when faced with Link’s invocation of his Fifth Amendment privileges, “[b]ut Link provides no legal support for the assumption that, in the face of a material breach of a policy provision, Midwest was not permitted to simply seek a declaration that it had no coverage application.”

Concealed Info Was Material

Link admitted that he intentionally concealed information from Midwest. But that information was not material, Link implied.

The court of appeals disagreed.

The material Link concealed, Judge Nashold explained, was “basic information about Link’s posting photographs of and commentary about Plaintiffs on an adult website –nformation that must necessarily be relevant to determining coverage under the policy.”

“As demonstrated in Walker, the ‘materiality’ requirement is not a high bar,” Judge Nashold wrote. “We conclude that bar was met here.”

Link also argued was that Midwest had failed to show that it was prejudiced by his refusal to comply with the company’s discovery requests.

It was true that an insurance company must show that it was prejudiced by noncompliance with a non-cooperation clause, Judge Nashold explained. But Link presented no authority for the proposition that an insurer was required to show that it was prejudiced by an insured’s noncompliance with a concealment clause.

Noncooperation Breached Clause

With regard to the cooperation clause, Link argued that he had cooperated with Midwest. Alternatively, he argued that his lack of cooperation did not constitute a breach of the clause.

But there was nothing in the record about whether Link cooperated with Midwest’s lawyer, Judge Nashold explained.

And contrary to Link’s assertion to the contrary, Midwest had not made an arbitrary decision about what constituted cooperation under the clause, Judge Nashold wrote.

“Rather, Midwest has merely attempted to follow a well-established procedural path available to insurers defending under a reservation of rights, in which the free exchange of information or discovery is a prerequisite to determining coverage.”

The appellate panel also held that Midwest was prejudiced by Link’s non-cooperation.

“In the face of Link’s noncooperation, there was no obvious or reasonable way for Midwest to determine if the policy covered any of Plaintiff’s claims,” Judge Nashold wrote.

“These claims center on whether, when, and what Link posted about Plaintiffs and his state of mind in doing so. Thus, Midwest’s coverage determination rests on information that Link possess and can provide.”