This column summarizes selected published opinions of the Wisconsin Court of Appeals. Full-text decisions are available online. Prof. Daniel D. Blinka and Prof. Thomas J. Hammer invite comments and questions about the digests. They can be reached at the Marquette University Law School, 1103 W. Wisconsin Ave., Milwaukee, WI 53233, (414) 288-7090.

by Prof. Daniel D. Blinka & Prof. Thomas J. Hammer

Arbitration

Costs - Arbitration Agreement

Lane v. Williams, 2000 WI App 263 (filed 28 Nov. 2000) (ordered published 20 Dec. 2000)

The Lanes sued their insurer over a coverage dispute. The circuit court stayed the action and referred the matter to arbitration as contemplated by the policy, which also provided that the parties "share" the costs equally. The arbitration panel awarded the Lanes about $64,000. When the Lanes moved to confirm the award, as provided by Wis. Stat. section 788.09, they also moved for costs under various theories. Pursuant to section 807.01, the court granted Mrs. Lane double costs because the insurer had not accepted her offer of settlement. The judge awarded Mr. Lane taxable costs and interest on his award.

The court of appeals, in a decision written by Judge Peterson, reversed. Prior case law held that section 814.01 permits costs only after a "litigated trial court proceeding"; thus, "no statutory costs are available after an arbitration" (¶ 12). The court also held, based upon prior case law, that section 814.06 "does not give the circuit court an independent basis for awarding costs" (¶ 13). Costs must be explicitly authorized by statute, which was not the case here. Finally, case law also rejected the argument that language in the arbitration agreement that provided that "local court rules governing procedure and evidence will apply" incorporated the cost provisions in chapter 814.

The court next turned to the "double costs" imposed pursuant to section 807.01(3). It held that here too the statute is limited to a "prevailing party" in a "litigated trial court proceeding" (¶ 18).

Attorneys

Lawyer-client Relationship - "Medical Mal" Cases - The "Fund"

Wisconsin Patients Compensation Fund v. Physicians Ins. Co., 2000 WI App 248 (filed 3 Oct. 2000) (ordered published 29 Nov. 2000)

One insurance company, Physicians Insurance, provides about 40 percent of medical-malpractice coverage for the state's doctors. Under chapter 655 of the Wisconsin Statutes, the Wisconsin Patient's Compensation Fund provides excess coverage over and above such primary coverage. A trial court ruled that "Wis. Stat. § 655.27(5)(b) means that lawyers retained by it and other medical-malpractice insurers in connection with an action to which Wis. Stat. ch. 655 applies must 'assume[] an attorney-client relationship with the Fund' and that this 'requires that the Fund be provided with the timely transmission of all case evaluations, status reports, strategic recommendations, and other substantive communications of defense counsel subject to the provisions of the Code of Professional Responsibility.'" The trial judge also invalidated restrictions imposed by Physicians Insurance on what its hired lawyers may reveal to the Fund.

The court of appeals, in a decision written by Judge Fine, reversed. Wis. Stat. chapter 655 requires that every health-care provider carry primary insurance or be self-insured. The Fund provides only excess coverage. Other statutory provisions guarantee that "the Fund may not be sandbagged by a carrier seeking to shift to the Fund liability that is properly borne by the carrier" (¶ 5).

The dispute in this case centered around "the attempt by Physicians Insurance to limit the scope of representation provided to the Fund by lawyers hired by Physicians Insurance to represent its insured." The Fund contended that because chapter 655 mandates that the lawyer hired by the primary carrier must also represent the Fund and provide an "adequate defense," "it should be privy to all information gathered and strategy formulated by those lawyers" (¶ 7). But the Fund's contention violated "the apparent rule in this state that a lawyer/client relationship can only be formed by the mutual consent of the lawyer and client" (¶ 11). For the same reason, it would compel lawyers to violate rules concerning client confidentiality. Finally, the Fund's position blurs the legislature's distinction between an "adequate defense," where there is no apparent reasonable probability that the Fund will face exposure, and an "active defense," where the Fund's funds might be exposed (¶ 12).

Civil Procedure

Amending Pleadings - Relation-back Doctrine - Notice - Statute of Limitations

Grothe v. Valley Coatings Inc., 2000 WI App 240 (filed 3 Oct. 2000) (ordered published 29 Nov. 2000)

Plaintiff sued Valley Coatings for injuries she allegedly sustained as a result of her exposure to paint and chemicals used during construction at her workplace. Valley Coatings, which distributed the products, filed a third-party complaint against Omni Glass & Paint, which applied the products, and Miron Construction, the project's general contractor. The circuit court later granted summary judgment dismissing plaintiff's claims against Valley Coatings, and thereafter Omni and Miron moved to dismiss because she had not filed any claim directly against them. When plaintiff moved to amend her pleadings to allege claims against Miron and Omni, the trial court denied it because the statute of limitations had run and neither party had received notice within the required time.

The court of appeals, in a decision written by Judge Peterson, affirmed the trial court's order denying plaintiff's motion to amend her pleadings to name Omni and Miron as defendants pursuant to the relation-back doctrine, which is governed by Wis. Stat. section 802.09(3). Valley Coatings had impleaded Omni and Miron on June 10, 1998, just two days before the statute of limitations expired, but neither defendant received notice of the action until June 22, 1998, when they were served with the third-party summons and complaint. Since this "precise issue" has not arisen in Wisconsin's caselaw, the court looked to federal precedent construing the identical rule. It held "that the statute requires receipt of notice of the institution of the action within the statute of limitations" (¶ 11). Finally, the record revealed no abuse of discretion in the trial court's denial of the motion pursuant to its authority under Wis. Stat. section 802.09(1). The motion to amend came "late" in the proceedings and she offered no explanation for her failure to request such action earlier.

Commercial Law

Banks - Forged Checks - Customer's Duty

Weber, Leicht, Gohr & Associates v. Liberty Bank, 2000 WI App 249 (filed 10 Oct. 2000) (ordered published 29 Nov. 2000)

An advertising agency suffered significant losses because of an embezzlement that involved forged and altered company checks. The agency sued its bank and a jury awarded it about $66,000.

The court of appeals, in a decision written by Judge Fine, reversed on the ground that the Uniform Commercial Code (UCC) barred the judgment. The court held that "if a customer does not timely take the reasonable precautions to protect itself, and the bank has paid the items in good faith, the customer is, in the word of the code, 'precluded' from holding the bank liable for damages that the customer's vigilance would have prevented" (¶ 11). Here the jury found that the agency had failed to comply with the obligations imposed on customers by sections 403.406 and 404.406 (1997-98) of the UCC. Nor was the court troubled that the agency had framed its claim as a "misrepresentation" by the bank. Claims for misrepresentation may "supplement" the UCC but they may not "supplant them" (¶ 12).

UCC - Debt - Collateral - Article 9

Banks Bros. Corp. v. Donovan Floors Inc., 2000 WI App 253 (filed 3 Oct. 2000) (ordered published 29 Nov. 2000)

Two related companies, Donovan Floors and Breakfall, owed Bank One of Milwaukee nearly $250,000. When the debtors defaulted, Bank One sued James Donovan based on a personal guarantee, foreclosed on the Donovans' home, and moved to recover other secured collateral. The case was settled when Bank One, the Donovans, and both companies stipulated to the entry of a judgment foreclosing on the Donovans' home and replevin in connection with the secured property. Bank One also agreed to give the Donovans a chance to renew their business and accordingly executed two forbearance agreements in which it deferred the judgment's enforcement. Later Bank One assigned the debt and the security to BBC, which entered into a "Notice of Assignment, etc." with the Donovans and their allied entities. Ultimately, the deal failed to work out and BBC never received any payments as contemplated by the Notice of Assignment. Six years later BBC scheduled a sheriff's sale of the Donovans' home.

The Donovans brought this action seeking an order under Wis. Stat. section 806.07(1)(e) relieving them from the judgment of foreclosure and dismissing BBC's claim for a money judgment against James Donovan on the personal guarantee. The trial court denied their motion.

The court of appeals, in a decision written by Judge Fine, affirmed. Although no controlling caselaw existed, the court held that under the UCC, specifically Wis. Stat. section 409.505(2), BBC had a right to "immediate strict foreclosure of all the pledged assets. It gave up that right in consideration for a partial payment on the debt and the concomitant partial satisfaction." Thus, under the UCC the Donovans had no grounds to complain; "they agreed to that arrangement and did so in a statement signed after default." The court well understood that the Donovans "would love to have their cake (the chance to save their business given to them by [BBC's] agreement to hold off on its right to claim the assets pledged for the debt) and eat it also (keep those assets)" (¶ 11).

Criminal Procedure

Issue Preclusion - Revocation Proceedings

State v. Terry, 2000 WI App 250 (filed 24 Oct. 2000) (ordered published 29 Nov. 2000)

The defendant was found guilty of possessing a controlled substance with intent to deliver. On appeal he argued that the doctrine of issue preclusion should have barred his prosecution. Specifically, at a probation and parole revocation proceeding, an administrative law judge (ALJ) found insufficient evidence that he possessed cocaine under a preponderance (more likely than not) standard.

The court of appeals, in a decision written by Judge Curley, affirmed. The court applied a five-criteria test set forth in earlier cases and found that issue preclusion failed on three of them. It was satisfied that "(1) the district attorney was not a party to the proceedings and could not have obtained review of the ALJ's decision even if the district attorney had so desired. Moreover, DOC [the Department of Corrections] does not appeal the ALJ's decision in parole and probation revocation proceedings; (2) there are significant differences between revocation proceedings and criminal trials which warrant relitigation of the issue; and (3) under the circumstances present here, public policy considerations weigh against the application of issue preclusion" (¶ 10).

First, because the ALJ ultimately revoked defendant on three other counts, the DOC had no valid interest in appealing the ALJ's decision on count one. Second, revocation proceedings, unlike criminal trials, balance the public's interest in safety with the offender's rehabilitative needs. Finally, public policy considerations also justified the result. The revocation decision is made by the executive branch - the DOC, and the state is represented by a nonlawyer. If the ALJ's determination not to revoke precluded a criminal prosecution, district attorneys would be forced to intervene in all revocation proceedings (¶ 14).

Probation Revocation Hearings - Corpus Delecti Rule

State ex rel. Washington v. Schwarz, 2000 WI App 235 (filed 4 Oct. 2000) (ordered published 29 Nov. 2000)

In criminal trials, the State of Wisconsin applies a confession corroboration (corpus delecti) rule. According to Wisconsin's version of the rule, all elements of the crime do not have to be proved independently of an accused's confession; however, there must be some corroboration of the confession in order to support a conviction. "If there is corroboration of any significant fact, that is sufficient under the Wisconsin test." Holt v. State, 17 Wis. 468, 480, 117 N.W. 626 (1962).

In this case, the critical issue before the court of appeals was whether the confession corroboration requirement applicable to a criminal proceeding should also apply in a probation revocation proceeding. In a decision authored by Judge Nettesheim, the court of appeals held that the confession corroboration rule does not apply in probation revocation proceedings. But, said the court, this does not mean that a probationer's extra-judicial admission is per se an adequate basis for revocation. The admission must carry sufficient indicia of reliability or credence such that the fact finder can confidently rely upon it to support the conclusion that revocation is appropriate and necessary.

Return of Seized Property - Money Judgment Against Municipality for Property Mistakenly Returned to a Third Party

City of Milwaukee v. Glass, 2000 WI App 252 (filed 3 Oct. 2000) (ordered published 29 Nov. 2000)

The defendant was arrested by the Milwaukee police and charged with receiving stolen property. In connection with the arrest, the police seized a sizable quantity of copper wire and scrap metal from the defendant's residence. Later, the police contacted a party who the police believed to be the lawful owner of the scrap metal and released it to this person.

The defendant subsequently was acquitted of the charge. Then, using the case number of his criminal case, he filed a petition pursuant to Wis. Stat. section 968.20 seeking the return of the copper wiring and other scrap material seized by the police. Following hearings, the circuit court declared that the value of the property in question was $1,600 and awarded the defendant a judgment for that amount against the city because the police department no longer had the defendant's property.

In a majority decision authored by Judge Curley, the court of appeals reversed. The statute in question directs the trial court to return seized property to its rightful owner, unless the property is a dangerous weapon belonging to a person who committed a crime, contraband, or property needed for evidence or further investigation. The statute's purpose is to permit the swift return of seized property to the proper owner when the property is no longer needed by law enforcement personnel.

The majority was satisfied that the intent of the legislature in passing this law was to authorize the return of seized property and nothing more. Thus, the court cannot grant a money judgment to the rightful owner under section 968.20 when the property is missing or mistakenly returned to another.

Judge Schudson filed a dissenting opinion.

Warrantless Dwelling Search - Emergency Doctrine

State v. Rome, 2000 WI App 243 (filed 18 Oct. 2000) (ordered published 29 Nov. 2000)

Police found a young woman crying and walking along the street in the middle of a cold winter night, carrying a baby. The woman indicated that she and her intoxicated husband (the defendant) had had an argument about their children during which he had yelled, threatened her, and grabbed her hair. The argument was sufficiently serious to drive her out into the cold night without appropriate clothing for her or the baby.

Although the woman insisted that she did not want police involvement and that another child (a 2-year-old) had been asleep and fine in the house before she left, she did acknowledge that the defendant was drunk and probably did not even know that she had left the premises. The woman admitted that she was concerned about the 2-year-old child's welfare because of the defendant's intoxication and asked the officers to go to her house and check on the child, though she did not specifically give the police permission to enter her home.

Upon arrival, the officers made a warrantless entry of the premises after substantial but unsuccessful efforts to contact anyone within. Once inside, they found the defendant asleep on a bed in one of the bedrooms. An officer noticed a light flickering beneath the closet door and, believing that the 2-year-old child might be hiding in the closet, opened the closet door and found, instead of the child, a makeshift greenhouse and marijuana plant. Ultimately the child was located asleep in another bedroom.

The defendant was charged with one count of manufacturing marijuana. He moved to suppress the evidence found in his closet, arguing that the police entries into his home and closet were not justified by emergency circumstances. The circuit court denied the motion. In an opinion authored by Judge Snyder, the court of appeals affirmed the decision denying the motion.

The Wisconsin Supreme Court has approved the emergency rule as an exception to the warrant requirement, recognizing that the Fourth Amendment does not bar a government official from making a warrantless intrusion when the official reasonably believes that a person is in need of immediate aid or assistance. The searching officer must actually be motivated by a perceived need to render aid or assistance. Secondly, even if the requisite motivation exists, it must be found that, under the circumstances, a reasonable person would have thought an emergency existed.

In this case the defendant argued that the objective facts did not support a reasonable belief that the 2-year-old child was in immediate need of assistance, thereby warranting the entry into the house and closet. The court of appeals disagreed. In light of the circumstances as described above, a reasonable person could believe that there was an immediate need to provide aid or assistance to the child and that immediate entry into both the house and the closet was necessary to provide that aid or assistance. A situation need not necessarily involve a life or death circumstance in order to constitute an emergency within the emergency rule. The defendant was intoxicated and had been violent and threatening toward his wife while arguing about their children. A reasonable person could believe that the child could be in danger while in the defendant's care at that home. The objective prong of the emergency rule was thus met in this case.

The defendant also argued that the officers' entry was not subjectively motivated by a perceived need to render assistance to the child. The claim was that because one of the officers was apparently motivated, in part, by his duty to investigate an alleged domestic abuse incident between the defendant and his wife, the emergency exception did not apply. The court was not persuaded that the officers' concurrent suspicion of a domestic abuse incident robbed them of their ability to provide aid or assistance. Even if the officers had the investigation of alleged abuse on their minds, this would not have neutralized the genuineness of their aid and assistance concerns regarding the child. The safety concerns about the child were sufficient in and of themselves to immunize the seizure; any other investigatory motives were immaterial. The material question is whether the immediate need to provide aid or assistance was the officers' prime motivator. In this case the court concluded that the officers' need to provide aid or assistance was paramount to the perceived need to investigate an alleged domestic abuse incident.

Search Warrants - No-knock Entries

State v. Davis, 2000 WI App 270 (filed 7 Nov. 2000) (ordered published 20 Dec. 2000)

Police obtained a search warrant for heroin and related drug paraphernalia for the lower unit of a two-story house where the defendant lived. The warrant authorized the officers to enter the unit without first announcing their presence. [The defendant conceded that the affidavit supported the warrant's authorization for a no-knock entry.]

Minutes before the warrant was executed, a plainclothes police officer went to the premises to make an undercover drug buy and to get "a lay of the land" for the officers who were going to execute the warrant. The defendant admitted the officer into a little hallway section in the front of the house. The officer gave money to the defendant, who then proceeded to walk down a hallway and turn left into an unknown room area. The officer could hear at least three or four other people inside that room. After the defendant brought the heroin to the officer, he left the premises and told officers waiting to execute the warrant about his observations. A no-knock entry was then made in execution of the warrant.

The defendant moved to suppress evidence seized as a result of the no-knock execution of the search warrant. The circuit court denied the motion, and the court of appeals, in a decision authored by Judge Fine, affirmed.

Irrespective of whether a search warrant authorizes a no-knock entry, the reasonableness of such an entry is determined - not at the time the warrant is issued - but rather when it is executed. The state must show "particular facts" that "support an officer's reasonable suspicion that exigent circumstances exist" to justify a no-knock entry (¶ 9). The appellate court found that such exigent circumstances existed in this case. First, the officers could reasonably suspect that the other persons in the room entered by the defendant when she went to get the heroin for the undercover officer were either involved in or familiar with the defendant's drug dealing. Second, just days before the execution of this warrant, the lead detective on the case had seen a large, pitbull-type dog being brought out of and back into the house. Given that the defendant had just sold heroin to the undercover officer, it was not unreasonable for the detective to reasonably suspect that the dog was in the house, guarding the cache. Third, the detective explained how easily and quickly heroin could be destroyed. Said the court, "none of these circumstances were negated by the undercover officer's observations from the front part of the hallway minutes before the officers executed the warrant; all made the officer's no-knock entry constitutionally valid" (¶ 11).

Employment Law

Wisconsin Fair Employment Law - Discriminatory Termination Based on Disability - Requirement of Expert Testimony

Wal-Mart Stores Inc. v. Labor and Industry Review Commission, 2000 WI App 272 (filed 22 Nov. 2000) (ordered published 20 Dec. 2000)

The employee in this case worked for Wal-Mart as a tire and lubrication technician. His principal duties consisted of draining oil and changing oil filters on automobiles. He suffers from a form of mental illness known as obsessive-compulsive disorder (OCD). The employee was receiving treatment for his OCD in the form of medications and psychotherapy. About three months before he was fired, Wal-Mart granted him an extended leave to allow him to undergo a change in his medications. He then returned to work, at first part-time, progressing to full-time over a four-week period. Soon after his return to work, a supervisor announced to the automobile service technicians that another employee was being promoted to the position of "bay manager." The employee in this case allegedly reacted angrily and vociferously to this news and thereafter committed an act of insubordination for which he was fired.

The Labor and Industry Review Commission (LIRC) determined that Wal-Mart had discriminated against the employee by terminating his employment because of his disability. The circuit court affirmed the LIRC.

In a majority opinion authored by Judge Deininger, the court of appeals reversed. It concluded that because there was no expert testimony establishing that the behavior for which the employee was fired was caused by his mental illness, the LIRC erred in finding that Wal-Mart terminated his employment because of his disability.

Wal-Mart conceded that the employee had a disability within the meaning of Wisconsin's Fair Employment Law. However, in order to prevail on the discrimination claim, the employee also had to show that Wal-Mart terminated his employment because of his disability. With regard to the latter, the appellate court concluded that expert testimony was a prerequisite for an LIRC finding that the employee's vociferous and insubordinate conduct was caused by his disorder.

There was nothing in the record from which the appellate court might conclude that the symptoms and manifestations of OCD are within the realm of the ordinary experience of mankind. It thus concluded that the question of whether the OCD caused the employee to react angrily and vociferously to the news that he had been passed over for promotion and thereby to engage in allegedly insubordinate conduct is sufficiently complex and technical that a lay factfinder without the assistance of expert testimony would be speculating on the matter (¶ 17).

The court observed in footnote that expert testimony may not be a necessity in every case involving a claim that certain behavior or misconduct is caused by a disability. The causal linkage between certain behaviors and some disabilities may well be within the realm of the ordinary experience of mankind, such as the consumption of alcoholic beverages by one who suffers from alcoholism.

Judge Vergeront filed a dissenting opinion.

Family Law

Divorce - Equitable Estoppel - One-sided Indefinite Maintenance Modification Provision of Divorce Judgment

Patrickus v. Patrickus, 2000 WI App 255 (filed 19 Sept. 2000) (ordered published 29 Nov. 2000)

The parties were divorced after 34 years of marriage. During the marriage the wife worked as a homemaker and the husband was employed as a certified public accountant. At the time of their divorce, they entered into a comprehensive marital settlement agreement that was approved by the trial court and incorporated into the divorce judgment. It provided the wife a maintenance payment for an indefinite period modifiable annually, provided the amount would not be less than the greater of one-half of the net profit of the husband's accounting practice or $4,375 per month, unless the husband became permanently disabled or the wife cohabited or remarried.

Three years later the husband moved to modify maintenance based upon a reduction in his income. His ex-wife argued that he was equitably estopped from seeking a maintenance modification. The trial court concluded that the marital settlement agreement was unfair because it permitted the wife to seek increases in maintenance for an indefinite period of time while providing no mechanism for the husband to seek a reduction. The court concluded that, for reasons of public policy, equitable estoppel raised no bar to the husband's motion for maintenance modification.

The court of appeals, in a decision authored by Chief Judge Cane, affirmed. A party may be equitably estopped from seeking modification of the terms of a maintenance stipulation incorporated into a divorce judgment if both parties entered into the stipulation freely and knowingly, the overall settlement is fair and equitable and not illegal or against public policy, and one party subsequently seeks to be released from the terms of the court order on the grounds that the court could not have entered the order it did without the parties' agreement. See Nichols v. Nichols, 162 Wis. 2d 96, 469 N.W.2d 619 (1991).

Applying these principles, the court of appeals concluded that the circuit court did not err in deciding that equitable estoppel did not bar the husband's motion for modification. The parties entered into a comprehensive marital settlement freely and knowingly that was approved by the trial court and incorporated into the divorce judgment and the court would not have had the power to enter the settlement absent the parties' agreement. Thus, the only remaining issue was whether the stipulation, at the time it was entered into, violated public policy because it burdened only one party with the entire risk of financial hardship indefinitely.

The appellate court concluded that the one-sided indefinite maintenance modification stipulation must be voided on public policy grounds. It violates basic fairness for the wife to be entitled to the perpetual benefit of increases in her ex-husband's income, without sharing in the risk occasioned by a reversal of his good fortune. And, unlike an order that specifies a nonmodifiable fixed amount or term of maintenance, the present one-sided maintenance modification provision invites inevitable litigation. The court agreed with the trial judge that the one-sided indefinite modification provision in this case fails to accomplish goals of fairness and finality and must be voided on public policy grounds.

GAL - Fees - Indigents

Olmsted v. Circuit Court, 2000 WI App 261 (filed 16 Nov. 2000) (ordered published 20 Dec. 2000)

Olmsted moved to modify the terms of her children's placement and the court reappointed the guardian ad litem (GAL) who had represented them at the divorce proceedings. Although the order directed the county to pay the GAL at the "SCR rate," both the GAL and the county asked the judge to review the compensation issue. The judge concluded that Olmsted was indigent but that the children's father was not. The judge ordered both parties to pay $50 per month for GAL fees.

The court of appeals, in an opinion written by Judge Deininger, reversed. The court held that the "only reasonable interpretation of Wis. Stat. section 767.045(6) (1997-98) is that an indigent party may not be ordered to pay guardian ad litem fees" (¶ 5). It also held that under the present statute, "when one party is indigent and the other is not, a court's only option is to order the nonindigent party to pay the guardian ad litem's fees" (¶ 8). Put differently, a judge cannot allocate part of the payment to the county and part to the nonindigent party. Finally, the court declined to address the proper hourly rate for compensating GALs.

Insurance

UIM - Exclusions - Umbrella Coverage

Jaderborg v. American Family Mut. Ins. Co., 2000 WI App 246 (filed 24 Oct. 2000) (ordered published 29 Nov. 2000)

After their son was injured in an automobile accident, the Jaderborgs obtained the $50,000 limits from the tortfeasor's insurer, which did not cover the boy's damages. The Jaderborgs carried automobile insurance, which included underinsured motorist (UIM) coverage and a personal liability umbrella policy issued by American Family. American Family paid the limits of the UIM coverage provided by the automobile policy. The Jaderborgs also claimed that the personal liability umbrella policy provided another source of UIM coverage. American Family denied that claim, but the trial court declared that the umbrella policy did afford such coverage.

The court of appeals, in a decision written by Judge Peterson, reversed. The umbrella policy expressly excluded UIM coverage. The court held that neither the "other insurance" nor the "intra-insured" provisions created any ambiguity. The "other insurance" provision served only to "prioritize the insurance coverage afforded by the policy through other applicable insurance" (¶ 10). It did not grant coverage. The "intra-insured" clause also was inapplicable because it simply "allows one insured to sue another in situations such as guest-passenger accidents" (¶ 14). In short, "[c]overage cannot be established by an exception to an exclusion" (¶ 17).

School Districts - Independent Contractors - Statutory Limits

Reuter v. Murphy, 2000 WI App 276 (filed 9 Nov. 2000) (ordered published 20 Dec. 2000)

Reuter was badly injured in an accident while riding in a car that was taking him home from school. The car's driver, Murphy, was paid to take children to and from school, in her own vehicle, by the school district. The agreement also obligated Murphy to carry insurance on her car and the district paid for necessary additional coverage. Reuter sued Murphy and the district's insurer, Wausau Insurance. He alleged that Murphy was an "independent contractor" and hence recovery was not limited by Wis. Stat. section 893.80(3) (1997-98).

The court of appeals, in an opinion written by Judge Eich, affirmed. First, the court rejected Reuter's contention that the doctrine of issue preclusion barred Wausau from litigating its "no-coverage" claim. It conceded that Wausau raised identical "issues" in Kettner v. Wausau Ins. Cos. (Ct. App. 1995), but this case fell within "the well-recognized 'issue-of-law' exception" to the issue preclusion rule because the "claims" were not identical (¶ 11). Second, the omnibus statute, Wis. Stat. section 632.32, required Wausau's coverage because Murphy's car was a "hired" vehicle within the meaning of the policy and the "owner/driver" exclusion otherwise would forestall coverage. "[U]nder the omnibus statute, the coverage enjoyed by the named insured (e.g., the district) must apply in the same manner to anyone using the described vehicle for a purpose and in a manner permitted by the policy (e.g., transporting children to and from a district school), [thus] we hold that the statute extends coverage to Murphy" (¶ 15).

Finally, the record clearly supported the judge's finding that Murphy was an "independent contract" against whom the statutory damage limitations did not apply. The district had never taken any steps to "control the details of the driver's work." Rather, the district gave Murphy "full discretion to set her own procedures and her own rules for transporting the students to and from school" (¶ 20). From this it followed that Kettner precluded Wausau's arguments that the caps contained in Wis. Stat. section 345.05 and section 893.80(3) limit Reuter's damage recovery.

UIM - Reducing Clauses - Notice - Constitutionality - Ambiguity - Illusory Coverage

Sukala v. Heritage Mutual Ins. Co., 2000 WI App 266 (filed 9 Nov. 2000) (ordered published 20 Dec. 2000)

Sukala was seriously injured while driving a truck for his employer. His employer carried a policy issued by Heritage that included underinsured motorist (UIM) coverage of $1 million, and Sukala himself had UIM coverage of $250,000 per person, $500,000 per accident, through a policy issued by Western National. Both policies contained reducing clauses for any amount "(1) paid for bodily injury under another insured liability insurance, and (2) paid or payable as worker's compensation benefits" (¶ 2). The other driver's liability insurer (also Heritage) paid Sukala $100,000. Sukala also received about $600,000 in worker's compensation benefits. The Sukulas brought this action against the insurers to recover additional compensation. They moved the court to find: 1) the UIM reducing clause in the employer's policy was invalid because it failed to comply with the notice requirements in Wis. Stat. section 631.36(5) (1997-98); and 2) the reducing clauses in both policies were invalid because Wis. Stat. section 632.32(5)(i) was unconstitutional. The trial judge denied both motions.

The court of appeals affirmed in a decision by Judge Dykman. Regarding the first motion, case law clearly held that no notice is required where coverage changes result from changes in statutes, and not a "change initiated by the insurance company." Nonetheless, the Sukalas argued that these cases were distinguishable because Heritage had given them "some notice" that UIM coverage had changed. The court held that section 631.36(5) does not apply to changes related to insurance policy reducing clauses that are not initiated by the insurance company but instead comes into effect by a statutory change, even where the insurance company gratuitously sends a renewal notice discussing altered UIM terms" (¶ 7).

The court next addressed a range of issues relating to the validity of the reducing clauses. The supreme court's recent decision in Dowhower v. West Bend Mut. Ins. Co., 2000 WI 73, ¶ 36, "disposed" of the Sukalas' claim that section 632.32(5)(i) was unconstitutional. The statute and policy language were identical. The court of appeals addressed several further issues. First, the policy language was unambiguous. Although "it may be somewhat cumbersome for an insured to cross-reference the limiting provisions and the declarations page ..., this does not make the policy language ambiguous, nor are the provisions ambiguous because the calculation of actual benefits under some circumstances could become complex" (¶ 14). Second, the UIM coverage was not illusory. The court held that Dowhower extends to all three subdivisions in section 632.32(5)(i), which thus permits reducing UIM coverage by worker compensation benefits (¶ 18).

Lemon Law

Component Parts - Manufacturer

Harger v. Caterpillar Inc., 2000 WI App 241 (filed 25 Oct. 2000) (ordered published 29 Nov. 2000)

The issue in this case was "whether a manufacturer of component parts of a motor vehicle is subject to the Lemon Law." The court of appeals, in a decision written by Judge Brown, held that "a manufacturer of component parts who ships the completed part to the automobile manufacturer is not liable" under the statute (¶ 1). The defendant, Caterpillar Inc., manufactured the engine that was in plaintiff's 1992 Peterbilt tractor.

The holding turned on Wis. Stat. section 218.01(1)(L), which describes two classes of manufacturers. "Class 1" consists of those who manufacture or assemble motor vehicles and was not an issue in this case. "Class 2" manufacturers are defined by four prerequisites. Specifically, "Caterpillar must have manufactured or installed special bodies or equipment on a previously assembled truck chassis," which, "when installed must have formed an integral part of the motor vehicle," and which "when installed must have constituted a major manufacturing alteration." Finally, Caterpillar must have owned the completed unit. (¶ 5)

Plaintiff failed to establish the first element: Caterpillar only made and sold the engine to Peterbilt, which installed it on the chassis. Plaintiff also fell short on the fourth element. The "completed unit" consisted of the assembled chassis plus the special bodies or equipment. The engine cannot be both the "special bodies or equipment" and the "completed unit." Peterbilt, not Caterpillar, owned the "completed unit." Finally, the legislature obviously did not intend such a result because Lemon Law damages include replacing the vehicle or refunding the purchase price. Component part manufacturers are not in the business of providing "vehicles," nor would it make sense to require a party like Caterpillar to pay the entire purchase price.

Motor Vehicle Law

Implied Consent - Technical Error in Notice of Intent to Revoke the Operating Privilege

State v. Gautschi, 2000 WI App 274 (filed 9 Nov. 2000) (ordered published 20 Dec. 2000)

The defendant appealed an order revoking his motor vehicle operating privilege based on his refusal to submit to an implied consent blood alcohol test after being arrested for OWI. He argued that a form known as the Notice of Intent to Revoke the Operating Privilege failed to provide him with the information required by Wis. Stat. section 343.305(9)(a)5, thereby depriving the trial court of personal jurisdiction to revoke his operating privilege. In a decision authored by Judge Deininger, the court of appeals concluded that, although the notice contained a technical error, it did not prejudice the defendant.

Under the statute, the notice must advise the driver that one of the issues at an implied consent refusal hearing is "whether the officer had probable cause to believe the person was driving or operating a motor vehicle while under the influence of alcohol ... and whether the person was lawfully placed under arrest" for OWI or a local ordinance in conformity therewith. The notice that was used in this case described that issue as being whether the officer "was entitled to request that [the defendant] submit to the test."

The court of appeals concluded that whether the officer was entitled to request a test is not substantially the same as whether the officer had probable cause to believe the person was driving or operating while under the influence of alcohol and whether the person was lawfully placed under arrest for OWI. Even though the notice was deficient, however, did not mean that the defendant is entitled to reversal of the revocation order and dismissal of the proceedings. The court concluded that the insufficient description in the notice of the issues that may be contested at a refusal hearing constitutes a technical error.

The court next had to consider whether the state had established that the defendant was not prejudiced by the deficiency in the notice he received. The court concluded that he was not prejudiced by the technical error. Even though the notice did not precisely communicate all of the possible issues that could be raised at a refusal hearing, the record did not reveal any prejudice to the defendant resulting from this defect. He filed a timely request for a hearing and was given the opportunity to have one. He was not precluded from challenging the existence of probable cause or the lawfulness of his arrest for OWI.

The court observed in footnote that it did not conclude that the state could always demonstrate the lack of prejudice stemming from a notice with the wording at issue in this case. For example, the recipient of a similarly worded notice, who believes that the officer lacked grounds to stop and arrest him or her for OWI, may suffer prejudice if the person fails to file a timely request for a hearing because he or she did not understand that this issue could be raised at a refusal hearing.

Real Estate

Damages - Earnest Money - Actual Damages - Election of Remedies

Galatowitsch v. Wanat, 2000 WI App 236 (filed 26 Oct. 2000) (ordered published 29 Nov. 2000)

Working through a realtor, buyers offered to purchase sellers' home on a WB-11 Residential Offer to Purchase form. Buyers deposited $2,000 as earnest money with the sellers' broker. Buyers failed to obtain financing and further omitted to notify sellers of this fact by the date specified in the contract. Sellers notified buyers in writing that they had breached the contract and demanded the earnest money as liquidated damages. When they did not receive the earnest money, sellers sued buyers and the real estate broker who held the funds and demanded $2,000 plus interest. One month later the sellers sold their home to another party but for a lesser price. Sellers then amended their complaint to allege actual damages based on the differences between the two sales prices and also directed the broker to return the earnest money to buyers. Following a bench trial, the court awarded sellers about $10,600 in damages.

The court of appeals, in a decision written by Judge Vergeront, affirmed. The issue was whether "the sellers in a failed residential real estate transaction are precluded, either by the terms of the purchase agreement or the doctrine of election of remedies, from recovering actual damages for the buyers' breach solely because the sellers requested the earnest money as liquidated damages and, in their initial complaint, requested the earnest money as a remedy."

Construing the purchase agreement, the court held that a seller's request for the earnest money as liquidated damages does not foreclose a lawsuit for actual damages provided the seller does not receive the earnest money (¶ 19). This approach, the court said, balanced the impact on both parties and was more likely to promote settlements. "The seller may request the earnest money as liquidated damages without the risk of having to file a suit in which the seller cannot recover all damages even if the seller proves a breach. Upon the seller's request, the buyer has the opportunity to evaluate the strength of the seller's claim of breach, the likely amount of damages, and their susceptibility of proof, and to either agree or disagree to the disbursement of the earnest money as liquidated damages. If the buyer agrees, the dispute is resolved. If the buyer disagrees, the buyer understands he or she may have to defend a suit for breach of the agreement and may have to pay actual damages; however, the seller must direct the return of the earnest money to the buyer before seeking actual damages." (¶ 18.)

Finally, the court considered buyers' argument that the doctrine of election of remedies precluded the actual damages claim. As determined by case law, "a party who has requested but not received the earnest money as liquidated damages and sues to recover is not precluded thereby from amending the complaint to request the alternative remedy of actual damages" (¶ 22). In short, this case concerned alternate remedies for a breach of contract, not inconsistent claims such as one for rescission of a contract and another for breach.

Torts

Group Homes - Vulnerable Residents - "Special Relationship"

Stauss v. Oconomowoc Residential Programs Inc., 2000 WI App 269 (filed 29 Nov. 2000) (ordered published 20 Dec. 2000)

Stauss, a developmentally disabled 39-year-old woman, sued the group home where she resided after a counselor repeatedly sexually assaulted her. Based on a jury verdict, the court entered judgment against the defendant group home. The court of appeals, in an opinion written by Judge Anderson, declined to address the defendant's rationale for appeal and instead remanded for a new trial because the real controversy was not fully tried.

Although the jury had heard argument and evidence about the group home's failure to supervise its counselor, the claim that it had negligently supervised Stauss, the plaintiff, was manifestly different and was not sufficiently tried (¶ 7). The court recognized "that a group home has a duty to protect its residents from the harm against which they are least able to protect themselves - abuse at the hands of staff." It adopted the reasoning of a Washington case and held that : "(1) the special relationship between the group home and its vulnerable residents gives rise to a duty of reasonable care, owed by the group home to its residents, to protect the residents from all foreseeable harm, and (2) sexual assault by a staff member is not a legally unforeseeable harm" (¶ 15).

Trusts

Trustees - Removal - Cause

Weinberger v. Bowen, 2000 WI App 264 (filed 8 Nov. 2000) (ordered published 20 Dec. 2000)

Catherine Bowen established a charitable trust and named her son John as one cotrustee and Weinberger, who was married to her granddaughter Jennifer, as the other cotrustee. The trust was irrevocable. After the trust was created, Jennifer began a divorce action against Weinberger, who later refused John's request to resign as cotrustee. Catherine and all trust beneficiaries filed a petition asking the circuit court to substitute a new cotrustee in Weinberger's place. Relying on Wis. Stat. section 701.12(1), the trial judge granted the petition because the settlor, Catherine, and all beneficiaries had consented in writing to the trust's modification.

The court of appeals, in an opinion written by Judge Nettesheim, affirmed. Wis. Stat. section 701.12(1) "clearly and unambiguously allows for the revocation, modification or termination of a trust upon the written consent of the settlor and all the trust beneficiaries" (¶ 11). No showing of "cause" was necessary. The court could not "discern any sound reason why the settlor and all of the beneficiaries should be precluded from modifying the terms of a trust if all are in agreement that such action is appropriate" (¶ 12). Another statutory provision, Wis. Stat. section 701.18(2), provides that trustees also may be removed for cause, but applies "where the settlor and all of the trust beneficiaries are not in agreement that removal is appropriate, or where the settlor is no longer living and therefore unable to provide written consent to the removal" (¶ 14).

Worker's Compensation

Exclusive Remedies - Suits Against Agents and Representatives of the Worker's Compensation Carrier

Walstrom v. Gallagher Basset Services Inc., 2000 WI App 247 (filed 10 Oct. 2000) (ordered published 29 Nov. 2000)

The plaintiff was injured on the job while working as a pipe fitter. An MRI revealed a herniated disc in his neck and a physician recommended that surgery be performed immediately. The plaintiff reported his medical condition to his employer and to American Zurich, the employer's worker's compensation insurer. American Zurich had contracted with an adjuster, Gallagher Basset Services Inc., to administer claims under the worker's compensation policy. Gallagher required the plaintiff to undergo an independent medical examination. The independent medical examiner agreed with the earlier recommendation for surgery and the operation was thereafter performed.

Following surgery, the plaintiff continued to experience pain. He brought an action against Gallagher alleging that it was negligent in delaying authorization for surgery. The plaintiff claimed that the delay resulted in permanent nerve damage. Gallagher brought a motion to dismiss and the circuit court granted the motion, finding that Gallagher was an agent of American Zurich and was immune based on the exclusive remedy provision of the worker's compensation law. See Wis. Stat. § 102.03(2).

In a decision authored by Judge Peterson, the court of appeals affirmed. Under the Worker's Compensation Act, recovery of compensation is not only the exclusive remedy against the employer but it also is the exclusive remedy against the worker's compensation insurance carrier. The exclusive remedy doctrine applies to agents and representatives of the employer and the court concluded that, to be consistent, it also must apply to agents and representatives of the compensation carrier. Because defendant Gallagher was a representative of the worker's compensation insurer American Zurich, the exclusive remedy doctrine protected Gallagher from liability.

Permanent Total Disability Benefits - Combination of Scheduled and Unscheduled Injuries

Secura Insurance v. Labor and Industry Review Commission, 2000 WI App 237 (filed 13 Sept. 2000) (ordered published 29 Nov. 2000)

The employee was injured while working as a room installer. The injury occurred when concrete leaked into his work boots, causing chemical burns to both of his feet. While the burns themselves eventually healed, they caused persistent, disabling pain in the employee's left foot. As a result of this disability, the employee developed difficulties with his gait, which produced musculoskeletal complications in his lower back. These complications have been diagnosed alternatively as reflex sympathetic dystrophy and/or complex regional pain syndrome. He continues to suffer from pain in his lower left extremity, low back and right shoulder, and experiences severe headaches.

The Labor and Industry Review Commission awarded the employee permanent total disability worker's compensation benefits pursuant to Wis. Stat. section 102.44(2). The employee's claim for lifetime benefits included both a scheduled injury to his left foot and a nonscheduled injury to his lower back. [Note: Permanent disability benefits are divided into two separate categories: compensation for scheduled injuries and compensation for unscheduled injuries. The former are set forth in Wis. Stat. section 102.52 and require the payment of benefits for a specific number of weeks as outlined in the statute. Numerous injuries are not included in the statutory schedules. Permanent total disability because of an unscheduled injury or injuries results in lifetime benefits.]

The worker's compensation carrier contended that only the employee's nonscheduled injury could support lifetime benefits under section 102.44(2) and that the employee failed to adequately separate his scheduled and unscheduled injuries. Accordingly, argued the insurer, the employee failed to establish that his permanent total disability was caused by his unscheduled injury.

In an opinion authored by Judge Snyder, the court of appeals concluded that section 102.44(2) lifetime benefits are warranted with a combination of scheduled and unscheduled injuries where the applicant establishes that a clear, ascertainable portion of the total disability is attributable to the unscheduled injury or injuries. Accordingly, the court affirmed the decision of the Labor and Industry Review Commission.

Personal Comfort Doctrine - Injury Sustained Off-premises

Fry v. Labor and Industry Review Commission, 2000 WI App 239 (filed 31 Oct. 2000) (ordered published 29 Nov. 2000)

Fry, a stockbroker paid solely on commission, had arrived at his employer's office at the usual time in the morning but left the office mid-day after informing office personnel that he had a scheduled appointment to have radiological testing for kidney stones at a local hospital. He had a history of kidney stone problems and earlier that day experienced kidney pain symptoms. He told the office receptionist that he expected to return to the office after the medical testing was completed. Fry was killed in a car accident while enroute to the hospital.

Fry's estate sought benefits under the Worker's Compensation Act (WCA). It claimed that at the time Fry was killed, he was performing services growing out of and incidental to his employment. Specifically, the estate contended that when Fry left his work place mid-day to drive to an appointment at a nearby hospital to seek treatment for his recurring kidney stone problem, he was ministering to his personal comfort, and thus his actions were incidental to his employment pursuant to the "personal comfort doctrine." The Labor and Industry Review Commission (LIRC) dismissed the claim for benefits, a decision that was later affirmed by the circuit court.

In an opinion authored by Chief Judge Cane, the court of appeals affirmed. Applying the great weight deference standard, it upheld as reasonable the LIRC's legal conclusion that Fry's attempted visit to the hospital fell outside the personal comfort doctrine.

An employer may be held liable under the WCA only for injuries that occur while an employee is "performing service growing out of and incidental to his or her employment." See Wis. Stat. § 102.03(1)(c)1. In limited circumstances, an employee may be performing services growing out of and incidental to employment even when the employee is engaged in activities related to the employee's own personal comfort under the personal comfort doctrine. This doctrine was developed to cover the situation where an employee is injured while taking a brief pause from his or her labors to minister to the various necessities of life. The personal comfort doctrine does not apply, and an employee is not within the course of employment, if the extent of the departure is so great that an intent to abandon the job temporarily may be inferred, or the method chosen is so unusual and unreasonable that the conduct cannot be considered as an incident of the employment.

In most of the Wisconsin cases where the personal comfort doctrine has been applied, the injuries for which compensation is sought have occurred within the time (that is, during specific paid working hours) and space (that is, on the employer's premises) limitations of the person's employment. In limited fact situations, recovery has been allowed for off-premises injuries. See Marmolejo v. DILHR, 92 Wis. 2d 674, 285 N.W.2d 650 (1979).

In this case, the appellate court concluded that it was reasonable for LIRC to hold that an employee who makes an appointment to seek medical attention for an immediate medical need not related to his employment and leaves the work place to do so, even if he intends to return to the work place the same day, has temporarily abandoned his job and is no longer "performing service growing out of and incidental to his or her employment" within the meaning of the WCA.

Compensation When Patient "Over-diagnosed and Over-treated" - GoodFaith Reliance on Medical Opinion

Honthaners Restaurants Inc.v. Labor and Industry Review Commission, 2000 WI App 273 (filed28 Nov. 2000) (ordered published 20 Dec. 2000)

Honthaners Restaurants Inc. and its worker's compensation carrier appealedthe Labor and Industry Review Commission's award of additional temporarytotal disability payments and additional medical expenses to a Honthanersemployee. They argued that the LIRC exceeded its authority under Wis.Stat. section 102.42(1) because the law permits the employee to be awardedbenefits only if her medical treatment and expenses were necessary andreasonable. They contended that LIRC's finding that the employee in thiscase had been medically "over-diagnosed and over-treated" was tantamountto a finding that her treatment and medical expenses were unreasonableand unnecessary.

In a majority decision authored by Judge Curley, the court of appealsaffirmed the decision of the LIRC. The employee suffered an undisputedcompensable injury that generated a conflict between the medical expertsas to the degree of her injury and its duration. The court concluded thatshe was entitled to be compensated for her additional medical treatmentand her expenses because she accepted the additional treatment in goodfaith.

Wis. Stat. section 102.42(1) permits compensation only when medicaltreatment and expenses are reasonably required and necessary. However,the case of Spencer v. DIHLR, 55 Wis. 2d 525, 200 N.W.2d 611 (1972), createdan exception to the general rule. In Spencer, the Wisconsin Supreme Courtallowed recovery for medical treatment and expenses that were incurredwhen the injured employee followed what, in hindsight, appeared to beerroneous medical advice. Spencer teaches that as long as the claimantengaged in the unnecessary and unreasonable treatment in good faith, theemployer is responsible for payment. The court of appeals was satisfiedthat Spencer controls the outcome of this case.

Judge Fine filed a dissenting opinion.