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Winter 2016 • Volume 14 • Number 3
Wisconsin Civil Trial Journal
WisconsinDefense Counsel
Defending Individuals And Businesses In Civil Litigation
Also In This IssuePresident’s Message: Food for Thought and a Call for Action Laura M. Lyons
An Overview of Wisconsin’s Safe Place Statute and Confusion Over Its Inconsistent Application Travis J. Rhoades & Ashley E. Webber
Managing the Duty to Defend and Some Practical Approaches Jeff Leavell
Court of Appeals Clarifies Liability Under Wisconsin’s Patient Confidentiality Laws Ryan M. Wiesner
Recent Wisconsin “Occurrence” Decisions Need Clarification Mollie T. Kugler
Responding to Discovery Requests Directed to Expert Witnesses Kimberly Poyner & Gabriel Houghton
Gabriel Houghton Ryan Law Firm LLC
Mollie T. Kugler Hinshaw & Culbertson LLP
Jeff Leavell Jeffrey Leavell S.C.
Laura Lyons Wisconsin Defense Counsel
Kimberly Poyner Ryan Law Firm LLC
Travis J. Rhoades Crivello Carlson, S.C.
Ashley E. Webber Crivello Carlson, S.C.
Ryan M. Wiesner Leib Knott Gaynor LLC
Editor
Andrew Hebl Boardman & Clark LLP
ww
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OFFICERS
PRESIDENTLaura Lyons
Bell, Moore & Richter, [email protected]
PRESIDENT ELECTFred Strampe
Borgelt, Powell, Peterson & Frauen, [email protected]
SECRETARY/TREASURERAriella Schreiber
Rural Mutual [email protected]
IMMEDIATE PAST PRESIDENTJeff Leavell
Jeffrey Leavell, [email protected]
PROGRAM CHAIRChristine Rice
Simpson & Deardorff, [email protected]
DIRECTORS
Nicole BacherCross, Jenks, Mercer & [email protected]
Christopher Bandt Nash, Spindler, Grimstad & McCracken, [email protected]
Frank DohertyHale, Skemp, Hanson, Skemp & [email protected]
Randall [email protected]
Patrick HeaneyThrasher, Pelish, Franti & Heaney, [email protected]
Andrew Hebl Boardman & Clark [email protected]
Sandra HupferSECURA Insurance [email protected]
Josh JohanningmeierGodfrey & Kahn, S.C. [email protected]
Gina MeierbachtolCorneille Law Group, [email protected]
Travis RhoadesCrivello Carlson, [email protected]
Amy SchollCoyne, Schultz, Becker & Bauer, [email protected]
Monte Weiss Weiss Law Offices, S.C., [email protected]
Amicus Curiae Committee Chair Monte Weiss
Weiss Law Offices, S.C. [email protected]
Employment Law Committee Chair Nicole Marklein Bacher
Cross, Jenks, Mercer & Maffei [email protected]
Insurance Law Committee Chair: Monte Weiss
Weiss Law Offices, S.C. [email protected]
Vice Chair: Christine Rice Simpson & Deardorff, S.C. [email protected]
Legislative Committee Chair Jeff Leavell
Jeffrey Leavell, S.C. [email protected]
Website Committee Chair Christopher Bandt
Nash, Spindler, Grimstad & McCracken, LLP
Wisconsin Civil Jury Instructions Committee Chair Christopher Bandt
Nash, Spindler, Grimstad & McCracken, LLP
Women in the Law Committee Chair: Laura Lyons
Bell, Moore & Richter, S.C. [email protected]
Vice Chair: Heather Nelson Everson, Whitney, Everson &
Brehm, S.C. [email protected]
Young Lawyer Committee Chair Danielle Rousset
Jeffrey Leavell, S.C. [email protected]
DRI Representative Michael Happe
Weld, Riley, Prenn & Ricci, S.C. [email protected]
Executive Director Jane Svinicki, CAE
Account Coordinator Kelli Dyszelski
Legislative Advisors Bob Fassbender
Hamilton Consulting Group [email protected]
R.J. Pirlot Hamilton Consulting Group
Columnists
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In This Issue…
Journal PolicyWDC Members and other readers are encouraged to submit articles for possible publication in the Civil Trial Journal, particularly articles of use to defense trial attorneys. No compensation is made for articles published and all articles may be subjected to editing.
Statements or expression of opinions in this publication are those of the authors and not necessarily those of the WDC or Editor. Letters to the Editor are encouraged and should be sent to the WDC office at 6737 W. Washington St., Suite 4210, Milwaukee, WI 53214. The Editor reserves the right to publish and edit all such letters received and to reply to them.
President’s Message: Food for Thought and a Call for Action by: Laura M. Lyons, President, Wisconsin Defense Counsel .............................................4
Responding to Discovery Requests Directed to Expert Witnesses by: Kimberly Poyner and Gabriel Houghton, Ryan Law Firm LLC ..................................6
An Overview of Wisconsin’s Safe Place Statute and Confusion Over Its Inconsistent Application by: Travis J. Rhoades and Ashley E. Webber, Crivello Carlson, S.C. ............................... 16
Managing the Duty to Defend and Some Practical Approaches by: Jeff Leavell, Jeffrey Leavell S.C. .................................................................................. 26
Court of Appeals Clarifies Liability Under Wisconsin’s Patient Confidentiality Laws by: Ryan M. Wiesner, Leib Knott Gaynor LLC .................................................................. 36
Recent Wisconsin “Occurrence” Decisions Need Clarification by: Mollie T. Kugler, Hinshaw & Culbertson LLP ............................................................. 44
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President’s Message: Food for Thought and a Call for Actionby: Laura M. Lyons, President, Wisconsin Defense Counsel
He walked into a deposition, wearing a suit. He had file materials with him. The receptionist told him that the attorneys weren’t ready for the court reporter yet and asked him to wait in a nearby area.
He was talking to some colleagues. They told him he should smile more. They explained that he looked better that way, more handsome and more approachable.
He wore a new suit and brought a new briefcase to a court appearance. The more experienced female attorney saw him before their case was called and said, “Wow! Look at you, with your fancy briefcase looking all professional!”
He filed a motion that she didn’t like. She called him up to complain about it. When he didn’t budge, she said, “Why are you doing this? You don’t have to do this.” He explained the reason behind his motion and indicated that he was representing his client’s interests. She said, “No, I mean, why are you working as an attorney? Why aren’t you staying at home taking care of your wife and kids?”
He arrived at a motion hearing. There were many lawyers and no seats available. A more experienced female attorney told him that he could sit on her lap.
He answered a phone call at the office. The female caller did not like what she was told and asked for his female supervisor, assuming he was the subordinate. He wasn’t. He was the supervisor.
He was in his office working after the long work day. A group of female attorneys were chatting in
a nearby hallway. An experienced female attorney loudly asked the others if they heard a noise. What noise, they asked? She loudly responded: “Oh, you know, the sound of his reproductive system growing old and dying before he could have children.”
Are these situations ridiculous? Yes, they are. Are they true? Yes, they are, with one modification: The genders have been flipped. All of these instances are true stories that happened to female attorneys in Wisconsin. And, unfortunately, they are not decades-old stories. All occurred within the past 10 years.
We can do better. We MUST do better.
Disagree with me? Consider these reasons in support of my position:
1. Because this is a small sampling of just a few instances. There are many more than this that female lawyers could tell you about. If you doubt me, ask around.
2. Because the attorney’s oath indicates that as an attorney you have an obligation to “maintain the respect due to courts of justice and judicial officers” and to “abstain from all offensive personality.” SCR 40.15.
3. Because no attorney, regardless of gender, should have to deal with situations like this.
4. Because you know that your daughters, nieces, sisters, and granddaughters do not deserve this treatment.
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5. If those reasons aren’t enough, consider the financial component. It is simply not a workable business model to continue these practices and behaviors.
More women than ever are entering the legal field. Ignoring these issues and failing to correct them may result in loss of talent and loss of business. Need data? See the recent ABA data from May 2016 entitled “A Current Glance at Women in the Law.”
We need to start addressing these issues for all the reasons set forth above. And because, frankly, we are all better than this. I encourage you to take a stand when you see or hear of instances like this. By supporting your friends and colleagues you are helping advance the legal profession in the right direction: Toward equal footing and equal treatment, regardless of gender.
Laura represents and advises clients in a variety of areas, including civil litigation defense and worker’s compensation. She has also handled appellate matters, including appeals to the Labor and Industry Review Commission and the Wisconsin Court of Appeals. She is admitted to practice in Wisconsin and before both the Eastern and Western U.S. District Courts of Wisconsin.
Laura is a member of the Dane County Bar Association, the Wisconsin Association of Worker’s Compensation Attorneys (WAWCA), and the State Bar of Wisconsin. She is also a barrister in the James E. Doyle Inns of Court.
Laura and her husband live in Madison. She has been a Big Sister in Dane County’s Big Brothers Big Sisters program since March 2006. Laura also volunteers as a coach for the Millennium Soccer Club, which brings affordable and accessible organized youth soccer to Madison’s low-income, ethnically diverse neighborhoods. In her free time, she enjoys spending time with her family and friends, running, reading, and playing soccer.
Visit www.wdc-online.org for the latest information on the Wisconsin Defense Counsel including: meeting announcements,
journal archives, conference speaker outlines, and more!
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Introduction
Civil litigation is often described as a battle of experts. Increasingly, plaintiffs’ counsel are employing discovery methods not expressly authorized by statute in an effort to procure evidence of expert bias.
Subpoenas duces tecum, for example, are being used to obtain documents and information directly from defense experts.
Under Wis. Stat. § 804.01(2)(d), interrogatories asking a party to identify their experts, and depositions to investigate the “facts known and opinions held” by them, are allowed.1 Prior to the 1995 revision of the statute, only interrogatories were authorized.2 If “further discovery by other means” was desired, a party was required to file a motion.3
The practice, however, was to conduct discovery without involving the court by agreement of the parties. These agreements would generally consist of the date, time, and place of the expert’s deposition, and who was to pay the expert’s fee. Usually, also by agreement, the expert’s file would be produced.
The rule eventually changed to reflect the practice. One question that now presents itself is whether documents outside the expert’s file must be produced when they are subpoenaed. The document
production portion of the subpoena may include 1099 tax forms and a list of prior testimony similar to that required by Fed. R. Civ. P. 26(a)(2)(B).4 The percentage of income that the expert derives from litigation work and an expert’s prior reports may also be included in the demand.5 Since these documents may tend to suggest an expert’s bias towards a particular side, they arguably fit within the broad criterion that requests be “reasonably calculated to lead to the discovery of admissible evidence.”6
This Article first sets forth a number of legal and tactical arguments for counsel to consider when confronted with overly intrusive discovery demands. It then acknowledges the circumstances in which discovery demands for an expert’s financial information are appropriate. Finally, the Article closes by offering several tips for dealing with these demands.
Inappropriate Discovery Demands to an Expert Witness
There are several legal arguments and tactical decisions that can be made in opposing a subpoena duces tecum directed to one’s expert. This section discusses some of the most useful approaches.
A. The Nuclear Option
Often, both sides hire experts. Nearly as often as that, both experts are familiar with writing reports and providing testimony for one side or the other in a lawsuit. Under the venerated trope “what’s sauce for the goose is sauce for the gander,” any
Responding to Discovery Requests Directed to Expert Witnessesby: Kimberly Poyner and Gabriel Houghton, Ryan Law
Firm LLC
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attorney who issues a subpoena demanding an expert’s personal financial information, or reports written for prior cases, should understand that the same demands will be made of his expert. The resulting skirmish may be detrimental to both parties. Adversaries should be aware that “what goes around comes around.”
B. Konle, Court Involvement, and Procedural Limits
Furthermore, there are limits on the amount of financial information from tax returns that needs to be provided in discovery. Even a plaintiff in a personal injury action claiming loss of income is not required to disclose his or her complete income tax returns without the court’s approval.7 In Konle v. Page, the Wisconsin Court of Appeals held that an in-camera inspection of the plaintiff’s records by the circuit court is the “best and proper procedure through which to filter such discovery demands.”8
A trial court has statutory authority under Wis. Stat. § 804.01(3) to limit disclosure of information in order “to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.”9 Moreover, the statutes specifically set forth procedures for quashing or modifying a subpoena for the same reasons.10 Though Wisconsin courts have not directly addressed the question of whether an expert’s personal financial information is discoverable, Konle provides some insight into what they might do, and jurisdictions with procedural rules like Wisconsin’s have held that such inquiries directed to expert witnesses must be authorized by a court order.11 In Primm v. Isaac, for example, the Kentucky Supreme Court acknowledged the relevance of an expert’s professional activities to uncovering possible bias, but stated that merely because such activities may be relevant “does not mean that parties are entitled to unfettered discovery of impeachment evidence by whatever means they seek.”12 These courts recognize that the liberal discovery provisions that apply to parties to the lawsuit and other lay witnesses were not meant to pertain to nonparty expert witnesses.13
C. The Plain Language of Wisconsin’s Discovery Statutes
Wisconsin Stat. § 804.01(2)(d), by its plain language, arguably limits the available procedures for conducting expert discovery to interrogatories and depositions. Only upon motion may the court “order discovery by other means.”14
The balance that is achieved in the discovery statutes is the product of competing interests. On the one hand, there is the party’s legitimate need to investigate all avenues that may be relevant to the case, including an expert’s potential bias, and on the other hand, individuals have a right to be free of intrusive and harassing discovery demands.
A person may be compelled to answer written interrogatories, and to sign those answers under penalty of perjury, but interrogatories can only be served on parties to the lawsuit.15 Parties can be sent requests for documents and demands to enter upon land.16 A separate action may also be started to compel non-parties to do the same.17 Further, a party may be forced to admit or deny the most difficult and salient facts under Wis. Stat. § 804.11, and be subject under that statute to pay actual costs and attorney fees if reasonable inquiry is not made prior to the answer being made, but this statute does not allow these same requests to be sent to a non-party.
Subpoenas can compel a nonparty to testify and/or to provide documents.18 Attorneys, as officers of the court, have been granted the authority to issue subpoenas.19 That authority, however, is kept in check by the opposing attorney’s right to move the court to modify or quash the subpoena.20
The Wisconsin Supreme Court was certainly aware of all of these discovery vehicles when, through our legislature, it amended Wis. Stat. § 804.01(2)(d) to allow for expert depositions without leave of the court.21 Instead of authorizing parties to use any discovery method they wish to employ to obtain information about an expert, the court chose to treat expert witnesses differently than non-expert, nonparty witnesses. If counsel requires certain
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documents, the trial court has within it authority to order said production. Without first receiving a stipulation from opposing counsel, or the imprimatur of the court, however, it would appear counsel does not have the right to employ any discovery method he chooses.22
D. Wisconsin’s Rules Contrasted with the Federal Rules of Civil Procedure
The Federal Rules of Civil Procedure mandate that a party identify any expert witness they intend to call at trial, and provide their written reports without awaiting a formal discovery request.23 The report must contain a variety of information, including a “complete statement” of all opinions the expert will express, the facts or data that underlie those opinions, background information about the witness’s prior testimony, and how much he was paid for his work on the case.24 The rather broad federal rule is rooted in the idea that the facts considered by an expert in forming his opinion are not considered work product.25
Fed. R. Civ. P. 26(a)(2)(B), however, has not been adopted in Wisconsin. There is no similar requirement to produce documents in our state’s statutes. The omission of such mandatory disclosures is significant. Under the canon of construction expressio unius est exclusio alterius, because Wisconsin’s statutes omit these mandatory disclosures, there is an argument that they are not required.26 If Wisconsin intended to follow the Federal Rules, these requirements could easily have been included in Wis. Stat. § 804.01(2)(d) when that statute was amended in 1995.
E. Chilling Effect
Courts may also be persuaded by the argument that requiring experts to disclose personal financial information may have a chilling effect on a party’s ability to retain high-quality experts.27 Those who have published articles in distinguished journals, taught at prestigious universities, and are recognized authorities in their chosen field may shy away from the rough and tumble of litigation when it means not merely defending their opinions, but also producing
their tax records. The adversarial system, however, often requires experts’ participation in order for the factfinders to be able to render just verdicts.28
The danger of a chilling effect on experts’ willingness to participate in the litigation process may outweigh the probative value of the expert’s personal financial information.29 The mere fact of compensation, even for experts whose main source of income comes from litigation work, lacks probative force when cross-examination is sufficient to reveal whether an expert is “consistently chosen by a particular side in personal injury cases to testify on its respective behalf.”30
F. Slippery Slope
Courts may also be persuaded to limit overly broad discovery requests to expert witnesses because of the door such requests could open to collateral issues. As any litigator knows, sometimes what is produced is neither accurate nor complete. Accordingly, since discovery begets discovery, a subpoena for an expert’s prior reports may lead to additional depositions and, perhaps, a trial prolonged with inquiries into an expert’s bias that have no bearing on the substantive issues. If prior reports from other cases are produced, the similarity or dissimilarity between such cases may have to be explained by the expert at trial in order to prevent the jury from getting an impression that the expert does not want to provide. In short, a trial within a trial may ensue.
Extensive probing of an expert’s financial circumstances may only confuse and distract the jury without having any relation to the issues the jury is to decide. Because both sides will likely be producing the same type of information for their respective experts, what should be a sideshow to expert testimony may end up being the marquee attraction. Of course, in addressing these issues, one must factor in the increased cost of litigation, which, by anyone’s estimate, is already too expensive.
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Appropriate Financial Discovery
Notwithstanding the arguments outlined above, information may rightly be discoverable in order to expose a perversion of the system. For example, take the case of a medical provider who routinely treats a substantial number of plaintiffs from a particular law firm. The settlement or verdict that is reached fails to satisfy the provider’s lien, yet a review of public records indicates that the provider never sues the plaintiffs to collect the remainder of the bills. One might conclude that some “arrangement” exists between the law firm and the provider. Financial information in such a case is essential to uncover the truth behind these questionable dealings.
Similarly, if there is an indication that medical specials have been artificially enhanced by diagnostic testing, or there has been an “unbundling” of services in contravention of the CPT codes,31 then financial information will likely be necessary to establish any irregularities. The point is that, when counsel makes “a strong showing that the witness has been evasive or untruthful,” a court may order further disclosures. 32
Nevertheless, the argument that overly intrusive demands for an expert’s personal financial information will have a chilling effect is often persuasive. The reality is that both plaintiffs and defendants depend on experts. If experts of high repute are compelled to disclose their personal data, many would refuse to participate in litigation to the detriment of both sides.33
Practice Pointers
When your expert is served with a subpoena, the first thing to do is find out what is being demanded. Then ask your expert what, if anything, they do not want to produce. Uniformity from one’s experts on this question is necessary to prevent an allegation that one expert is being unreasonable in light of another expert’s willingness to produce the documents. The demand that is the least objectionable to all of one’s experts will provide the proverbial line in the sand.
The next step is to call opposing counsel. Try to reach a compromise about the scope of materials that must be provided. Be sure to convey your position on the scope of expert discovery to counsel in writing.
Trying to reach an agreement with opposing counsel is important for two reasons. First, the trial court may dislike becoming involved in discovery disputes, and local court rules often mandate that parties make a sincere effort to resolve such disputes before bringing a motion. Second, if all counsel is asking for is your expert’s file and invoices for the current case, it may not be worth arguing about. A trial court would likely require disclosure of these particular documents in any event.
If, after your best efforts, a compromise is not achievable, counsel should file a motion to quash under Wis. Stat. § 805.07(3). It is desirable to have some minor measure of control over the motion by being the movant instead of the respondent. The letter setting forth your willingness to compromise should be included by way of an exhibit to counsel’s affidavit. Objections to specific demands in the subpoena should be set forth. Arguments based on procedural grounds and/or policy considerations, some of which have been discussed in this Article, should be made succinctly and with verve. Counsel should also emphasize that the court’s order with regard to what must be produced should apply to both parties’ experts with equal force without requiring the moving party to issue its own subpoenas.
Conclusion
Subpoenas directed to experts broadly requesting their personal financial information may not be allowed under the statute, may offend the sensibilities of the experts, and may result in a chilling effect on highly-qualified experts’ willingness to participate in litigation. Steps should be taken, therefore, to protect one’s experts from unreasonably intrusive demands by opposing counsel.
Nevertheless, under certain circumstances it may be appropriate to compel the disclosure of financial
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information. As noted above, when financial records likely contain evidence of questionable dealings, or even nefarious activity, then a much stronger argument exists for their production. Careful selection of such cases is necessary in order to prevent the problems outlined above.
Kimberly Poyner graduated from The University of Oklahoma with a B.A. in Journalism. She received her J.D. from Oklahoma City University School of Law in 2012. She passed the Wisconsin Bar Exam that same year, and is a member of the State Bar of Wisconsin and the Wisconsin Defense Counsel. She has been with the Ryan Law Firm since January 2015, and focuses primarily on insurance defense litigation.
Gabriel Houghton graduated from Marquette University Law School in 2012. After working as a solo practitioner for two years, he joined the Ryan Law Firm in 2014, and has focused on civil litigation with an emphasis on insurance defense.
References1 Reference is made to the 2013-2014 Wisconsin Statutes
unless otherwise indicated. Wisconsin Stat. § 804.01(2)(d)(1) reads:
Discovery of facts known and opinions held by experts, otherwise discoverable under par. (a) and acquired or developed in anticipation of litigation or for trial, may be obtained as follows: A party may through written interrogatories require any other party to identify each person whom the other party expects to call as an expert witness at trial. A party may depose any person who has been identified as an expert whose opinions may be presented at trial. Upon motion, the court may order further discovery by other means, subject to such restrictions as to scope and such provisions, pursuant to subd. 3. concerning fees and expenses as the court considers appropriate.
2 See 1993-1994 Wisconsin Statutes.3 Id.4 Fed. R. Civ. P. 26(a)(2)(B) reads as follows:
Witnesses Who Provide a Written Report. Unless otherwise stipulated or ordered by the court, this disclosure must be accompanied by a written report—prepared and signed by the witness—if the witness is one retained or specially employed to provide expert testimony in the case or one whose duties as the party’s employee regularly involve giving expert testimony.
The report must contain: i) a complete statement of all opinions the witness will express and the basis and reasons for them; ii) the facts or data considered by the witness informing them; iii) any exhibits that will be used to summarize or support them; iv) the witness’s qualifications, including a list of all publications authored in the previous ten years; v) a list of all other cases in which, during the previous four years, the witness testified as an expert at trial or by deposition; and vi) a statement of the compensation to be paid for the study and testimony in the case.
5 Prior reports, if they are similar, may suggest a lack of individual analysis of each case. Such reports may also be used to show inconsistencies in an expert’s opinions based on who hires him or her.
6 Wis. Stat. § 804.01(2)(a).7 Konle v. Page, 205 Wis. 2d 389, 397-98, 556 N.W.2d 380
(Ct. App. 1996).8 Id. 9 Wis. Stat. § 804.01(3)(a). 10 Wis. Stat. § 805.07(3).11 See, e.g., Cooper v. Schoffstall, 905 A.2d 482, 492 (Pa.
2006) (holding that a litigant must show cause and obtain an order before pursuing supplemental discovery of an expert’s financial information).
12 Primm v. Isaac, 127 S.W.3d 630, 634 (Ky. 2004). 13 See Cooper, 905 A.2d at 488 n.6. 14 Wis. Stat. § 804.01(2)(d)(1).15 Wis. Stat. § 804.08(1)(a).16 Wis. Stat. § 804.09(1) and (2).17 Wis. Stat. § 804.09(3).18 Wis. Stat. § 805.07(1) and (2)(a).19 Id. 20 Wis. Stat. § 805.07(3).21 See Wis. Stat. § 804.01(2)(d)(1), Wis. Sup. Ct. Order 95-
03, Judicial Council Note, 191 Wis. 2d xix, xx (1995).22 Wis. Stat. § 804.01(2)(d)(1).23 Fed. R. Civ. P. 26(a)(2)(A) and (B).24 Fed. R. Civ. P. 26(a)(2)(B)(i-vi).25 Patricia Graczyk, The New Wisconsin Rules of Civil
Procedure: Chapter 804, 59 Marq. L. Rev. 475 (1976).26 The Latin phrase is defined as follows: “a canon of
construction holding that to express or include one thing implies the exclusion of the other, or of the alternative.” Black’s Law Dictionary, at 620 (8th Ed. 2004).
27 See, e.g., Elkins v. Syken, 672 So.2d 517, 520 (Fla. 1996) (decision that medical experts need not produce 1099s was meant to forestall “any chilling effect on the availability of expert witnesses”) (emphasis added); Primm, 127 S.W.3d at 638-39 (concluding that “the information sought and the manner in which it has been requested is not only duplicative, but also so burdensome as to create a chilling effect on a litigant’s ability to find experts”) (emphasis added); Cooper, 905 A.2d at 494 (“[W]e are cognizant of the broader concern with a potential chilling effect.”) (emphasis added).
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28 See State ex rel. Dudek v. Circuit Court, 34 Wis. 2d 559, 597, 150 N.W.2d 387 (1967) (discussing the importance of expert witnesses in modern litigation).
29 See Elkins, 672 So.2d at 520 (holding that medical experts need not produce 1099s absent “the most unusual or compelling circumstances”).
30 Cooper, 905 A.2d at 495 (quoting Syken v. Elkins, 644 So.2d 539, 545 (Fla. App. 1994)).
31 Current Procedural Terminology (CPT) is a medical code used to report medical, surgical, and diagnostic procedures and services to physicians and health insurance companies.
32 See Cooper, 905 A.2d at 496 (citing State ex rel. Creighton v. Jackson, 879 S.W.2d 639, 643 (Mo. Ct. App. 1994)).
33 See supra note 29.
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An Overview of Wisconsin’s Safe Place Statute and Confusion Over Its Inconsistent Applicationby: Travis J. Rhoades and Ashley E. Webber, Crivello Carlson, S.C.
Introduction
Although Wisconsin’s Safe Place Statute is more than a century old, attorneys still struggle to understand the breadth of its application. This Article provides an overview of the Safe Place Statute and then
analyzes two cases that illustrate the ongoing confusion regarding the statute’s application. Finally, the Article concludes by emphasizing the need for further clarification from the courts.
The History of Wisconsin’s Safe Place Statute
Recent case law does not discuss the origin or intended scope of the Safe Place Statute. Most people are familiar with the expression “how can we know where we’re going if we don’t know where we’ve been?” With that axiom in mind, it helps to start from the beginning. For the Safe Place Statute, that means going back to the early 1900s.
The original Safe Place Statute was enacted in 1911, when the increase of mechanical devices and electric power caused “innumerable accidents”; thus, it “dawned upon the lawmaking power that life, limb, and health must not be sacrificed for the benefit of utility.”1 It was a time of widespread disapproval regarding a worker’s inability to obtain compensation for injuries sustained in the course of his or her employment. That said, the original language applied only to employers and dealt only
with the conditions of employment.2 Further, there was initial confusion regarding whether the statute applied only to equipment used by an employee or also to the building in which he or she was employed. So, the statute was amended in 1913 to extend its applicability to owners of a place of employment and to owners of public buildings.3 The legislature’s purpose in making these changes was to “secure the safety of buildings where the public gathered or to which persons resorted in numbers.”4
From the beginning, courts were careful with their application of the Safe Place Statute, and, when confronted with facts outside the plain language of the statute, would return to and study the legislative purpose before allowing a claim to proceed. Early decisions involving safe place claims illustrate a commitment to protecting public safety, but doing so in a limited and controlled manner.
For example, in Dugenske v. Wyse, the court found that the Safe Place Statute applied to a claim brought by a farmer who lost the fingers and thumb on his right hand because of a malfunctioning piece of equipment.5
In Delaney v. Supreme Investment Company, the plaintiff was injured when a sixteen-pound glass block fell from the front of the building she was walking past. Significantly, the court found that the statute did not apply in that instance because the statute was intended to provide greater protection to those within the building, and did not extend to persons on the street.6
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Finally, in Bewley v. Kipp, the plaintiff was a tenant who was injured outside her apartment unit when the stairway’s guard rail gave way. In dismissing the plaintiff’s claims, the court explained: “[w]e discover no legislative purpose in the enactment of this statute to change in any respect the mutual obligations of lessor and lessee at common law.”7 Going one step further, the Bewley court explained that the defective guard rail at issue in the case was the result of ordinary wear and tear and that the Safe Place Statute imposed no duty on the landlord, as property owner, to keep the guard rail in repair.8 While appreciating the difference between the landlord-tenant relationship and the employer-employee relationship, the rationale in Bewley reinforced the concept that a property owner’s duty under the Safe Place Statute is limited to structural defects.9
Although the statute’s original legislative purpose was, and remains, significant, the statute’s current application has become confusing, expansive, and has arguably strayed outside the intended area of protection as set forth in these early cases.
The Current Application of the Statute
A customer slips on a grape in the grocery store produce aisle. A patient walks into a glass door outside a doctor’s office. A frequenter trips on a “hidden” hole in a cemetery. The foregoing scenarios often result in litigation, and it is in this context that attorneys typically encounter the Safe Place Statute. As an aid to attorneys who defend against alleged safe place violations, it is worthwhile to address the basics before examining some of the more recent holdings that have made the statute’s application so confusing.
The current language of the Safe Place Statute, Wis. Stat. § 101.11(1), provides as follows:
Every employer shall furnish employment which shall be safe for the employees therein and shall furnish a place of employment which shall be safe for employees therein and for frequenters thereof and shall furnish
and use safety devices and safeguards, and shall adopt and use methods and processes reasonably adequate to render such employment and places of employment safe, and shall do every other thing reasonably necessary to protect the life, health, safety, and welfare of such employees and frequenters. Every employer and every owner of a place of employment or a public building now or hereafter constructed shall so construct, repair or maintain such place of employment or public building as to render the same safe.
Although section 101.11(1) is only a short paragraph, the application of the statute and the balance between public protection and certain liability remain in flux. The following is a basic “cheat sheet” of the statutory requirements:
Who has a duty? Employers and owners of places of employment or public buildings.10
What is the duty? The statute imposes three duties on employers and owners of places of employment or public buildings: the duty to construct, to repair, and to maintain a safe place of employment or public building.11 However, as set forth below, the duty of owners of places of employment or public buildings is very limited compared to the duty of an employer, which, in addition to the duty of an owner, includes the duty to furnish “safe employment.” As established by the case law, some of which is summarized below, safe employment appears to include almost anything.
What constitutes a violation? Safe place cases recognize two broad categories of unsafe property conditions: (1) structural defects and (2) unsafe conditions. Unsafe conditions are further broken down into two subcategories—those associated with the structure and those unassociated with the structure.12
What constitutes a structural defect? A defect is structural if it resulted from materials used in the building’s construction or from an improper
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layout or construction.13 Because of the nature of structural defects, they typically do not arise over time. That is, structural defects are generally present from day one, though they may not immediately be recognized.
Examples of structural defects: Structural defects include a handrail not being installed along a staircase14; a balcony railing that was not high enough15; a false ceiling that did not support a worker’s weight16; a poorly designed floor drain17; and a hazardous office window, although recently-installed.18
What constitutes an unsafe condition? An unsafe condition arises from the failure to keep an originally safe structure in proper repair or properly maintained.19 Unsafe conditions associated with the structure are those that involve the structure (or the materials with which it is composed) becoming out of repair or not being maintained in a safe manner.20 Unsafe conditions unassociated with the structure are conditions that would result in unsafe employment, including but not limited to, unsafe physical conditions, improper safety devices, and unsafe processes.21
Examples of unsafe conditions associated with the structure: Unsafe conditions associated with the structure include a missing theatre seat22; improper lighting, including failing to keep a restroom light turned on while the building is in use23; a loose window screen24; and an improperly connected elevator motor.25
Examples of unsafe conditions unassociated with the structure26: Unsafe conditions unassociated with the structure include a banana in a drugstore parking lot27; an Italian prune in a grocery store aisle28; chairs that were stacked haphazardly29; and an “averages board” leaning against the wall of a gymnasium.30
What if the employer or owner was unaware of the condition? Liability for injuries caused by structural defects are imposed regardless of notice of the defect, but liability for an unsafe condition
occurs only when there was actual or constructive notice of the condition.31
Who is liable? The owner of a public building is liable for structural defects and unsafe conditions associated with the structure when the unsafe conditions affect areas used by tenants in common or the public.32 The owner of a place of employment has the same liability as the owner of a public building and is also liable for unsafe conditions unassociated with the structure if the owner has substantial control over the place of employment.33 Finally, the employer is liable for the conditions of employment (including safety devices, equipment, etc.) and for all unsafe conditions, whether or not associated with the structure.34
The Safe Place Duties are Non-Delegable
The duties imposed on employers and property owners under the Safe Place Statute are non-delegable.35 “[T]he person who has [the duty under the Safe Place Statute] cannot assert that another to whom he has allegedly delegated the duty is to be substituted as the primary defendant in his stead for a violation of safe place provisions. Under any circumstance, it is the owner or the employer who must answer to the injured party.”36 Significantly, if you are the owner of a place of employment and the employer, wearing “multiple hats,” you are responsible for multiple duties under the Safe Place Statute.37
Although a safe place duty cannot be delegated, the statute is intended to impose liability on whomever breached their duty—whether the owner of a public building, the owner of a place of employment, the employer, all of the above, or any combination of the above.
A Discussion of the Statute’s Expanding Application
Determining whether a condition is a structural defect vs. an unsafe condition, and whether an unsafe condition is one associated with the structure vs. unassociated with the structure, is factually
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intensive. The classification is critical, and often not as straightforward as one would expect after 100 years of jurisprudence. Further, as straightforward as the concept of a “non-delegable duty” might seem, determining who owes the duty is similarly opaque because the case law assigns a great deal of import to the issue of control of the jobsite. These issues are demonstrated in the cases below.
In Powell v. Milwaukee Area Technical College District Bd., a student fell from a utility pole during a line mechanic class that was offered by a technical college. The electric power company owned the property and the building on the property, but leased a portion of the building and garage and loaned two of its employees to the college for teaching purposes.38 The property owner was responsible for janitorial services as well as the maintenance and repair of the property.39 The property owner provided the utility pole from which the student fell, but the students were the ones who dug holes for the poles and then erected them for purposes of class instruction. The students were also the ones who were responsible for removing the poles when instruction was completed.40 The court held that, “while the safe place statute standard of care for places of employment is broad, it does not extend to non-structural areas and temporary conditions which are not under the control of the owner.”41 Thus, the power company had no duty to maintain the utility pole because it was a “temporary condition, for which [the school] had exclusive control and maintenance responsibility.”42 Applying the Powell analysis, an owner of a public building or place of employment that relinquishes control of the premises should not be held liable when the injury occurs because of an unsafe condition unassociated with the structure.43
There are two significant questions in the analysis of most safe place claims, and both are highlighted in Powell. The first question is the classification of the condition—the court’s finding of an unsafe condition unassociated with the structure immediately removed potential liability for the owner of the public building, leaving potential liability for only the owner of the place of employment and the
employer. The property owner was not acting as an employer; thus, it was only potentially liable as the owner of the place of employment.
The second question is the question of control—the owner of a place of employment is only liable for unsafe conditions unassociated with the structure if the owner had the requisite control. Thus, the owner’s decision to relinquish control of the premises in Powell helped it escape liability. Unfortunately, things are not always as clear as they were in Powell.
In Barry v. Employers Mutual Casualty Company,44 the plaintiff was injured after he fell down a set of stairs at a corporate building. The building had a “winding” stairway that was carpeted, and this became a problem when the glue that was holding the carpet to the stairway came loose. The building owner hired an independent contractor to install vinyl strips, called “nosings,” on the front of each step to hold the carpeting in place. A few months after the nosings were installed, the building owner received complaints from women who had caught their heels on the edges of the nosings due to a height discrepancy between the nosings and the carpet. The building owner contacted the plaintiff, who was employed as a project manager for a small general contractor, to propose a solution for the problem. Plaintiff’s employer was in a long-standing construction contract with the property owner, and approximately 70% of plaintiff’s work was dedicated to various projects for the property owner. Nonetheless, the building owner ultimately did not accept the plaintiff’s proposal. Ironically, on the date of the incident, approximately four months after the proposal was rejected, the plaintiff, who was not at the job site that day for work related to the stairs, fell and was injured on the very stairs that he had previously proposed to fix.
Plaintiff sued the building owner, and the building owner commenced a third-party action for contribution against the company that installed the nosings and for indemnification from the plaintiff’s employer under the ongoing construction contract.
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The trial judge ruled that the nosing was a structural defect, removing the plaintiff’s burden of establishing notice, and the jury apportioned negligence as follows: 45 percent to the building owner, 45 percent to the “nosing” installer, and 10 percent to plaintiff. The court of appeals reversed on the ground that the loose nosing constituted an “unsafe condition associated with the structure,” but refused to remand the case for a new trial on the notice issue. The Wisconsin Supreme Court disagreed with the court of appeals, holding that a new trial on notice was appropriate.
Significant to this Article’s analysis of the developing case law are three things from Barry: first, the court held that the loose nosing constituted an unsafe condition associated with the structure; second, the court reiterated that the duties under the Safe Place Statute are non-delegable; and third, the court stated that because the duties are non-delegable, the independent contractor’s negligence should be imputed to the property owner.
Regarding the condition’s classification, the court found that the defect was an unsafe condition associated with the structure because the loose stairway nosing “resulted from a failure to repair or maintain the stairway, not a failure to safely construct the stairway.”45 Additionally, the supreme court agreed with the court of appeals that the “nosings added to the original stairway are not part of the original structure, but rather are ‘associated with the structure.’ To conclude otherwise would be to accept ... ‘circular reasoning,’ effectively ‘transmogrify[ing] all maintenance and repair defects into structural defects.’”46
Sticking with the classification of the condition for a moment, compare the Barry holding to Wagner v. Cincinnati Casualty Company, in which the court of appeals relied on Barry to find that a recently-installed window that blew in and injured an employee was a structural defect.47 In its reasoning, the Wagner court explained that, unlike the stair nosings in Barry, the window “was not an addition to an existing feature of the building—it fully replaced the prior window.”48 Going further, the Wagner court added that relying on the concept
of “addition” is misleading because it is often too “difficult to distinguish between an addition that is part of a repair and an addition that adds an entirely new building element.”49 This determination is very fact-intensive, and only additional case law will shed light on the future of the classification of conditions under the Safe Place Statute.
Considerable Uncertainty Remains Since Barry
On the one hand, Barry is consistent with prior case law regarding the non-delegability of the safe place duties because the owner of the building in that case wore all of the statutory hats—it was the owner of both the building and place of employment, and was also the employer. As set forth above, the question of liability is inextricably linked to the question of control.
On the other hand, Barry also leaves much to be desired. For example, what result could we expect if the injury occurred during the nosings’ installation—e.g., if the independent contractor’s employees began working, but before completing the installation went out for lunch, failed to rope off the stairway, and someone was injured as a result? Would the independent contractor be solely liable for its employees’ failure to secure the area? Would the owner of the place of employment avoid liability for relinquishing control of the area to the independent contractor? Or would the owner of the place of employment share liability for failing to inspect the premises and notice that the area was not roped off? These questions can only be answered by analyzing the contract between the parties and determining who had control of the area in which the unsafe condition existed. Turning to the contract does not conflict with the statute’s non-delegable duty, because both the owner of the building and the independent contractor, as employers, have duties under the Safe Place Statute. In this scenario, the contract does not delegate the duty, it serves to clarify the roles of the contracting parties, which brings us to our final point.
The Barry court’s holding appears to extend the non-delegable safe place duty to complete liability for the owner, which is inconsistent with the statute’s
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legislative purpose and probably not what the court actually intended with its ruling. Case law has long held that the negligence founded in safe place claims is comparable to ordinary negligence.50 Based on the facts of Barry, it seems likely that the court’s ruling was based on a concern about the pending claims—plaintiff only had a negligence claim against the building owner—rather than an attempt to create a new legal principle.51 In particular, had the court not imputed the independent contractor’s liability to the owner, the plaintiff would have been prevented from being made whole. As a result, Barry should not be read to create a blanket ruling for all cases alleging a safe place violation.52 Thus, in a case in which the plaintiff has claims of negligence against multiple defendants, at least one of which is founded in safe place, each defendant should still be expected to be responsible for its own liability. That said, as the case law, and Barry in particular, demonstrates, the statute’s application remains unpredictable.
Conclusion
Despite its old age, the application of the Safe Place Statute is still evolving and the last twenty years of case law illustrate the challenges faced by both litigators and courts alike. Defense counsel are encouraged to stay informed regarding the nuances of the statute, as there still remains much uncertainty regarding how courts will apply it to the facts in each particular case.
Travis Rhoades is a shareholder at Crivello Carlson, S.C., where he has spent his entire career. Much of his practice involves the defense of individual product liability claims for consumer, commercial, and industrial products manufacturers and their insurers. He represents site owners, manufacturers, distributors, and sellers of products, and business owners and their insurers in injury, death, and property damage claims. Travis is responsible for the development of national and regional strategies for manufacturing and contracting clients in product liability and toxic tort cases, and has represented clients in formal and informal meetings with governmental agencies responsible for
product safety. He has trial experience in product liability cases in Wisconsin, Kansas, Alabama, and Massachusetts, and has litigated claims and cases to resolution in 43 states.
Ashley E. Webber joined Crivello Carlson, S.C., as an associate in 2012. She works as a litigator in state, federal, and administrative forums. While at Marquette Law, Ashley served as Articles Editor for the Marquette Sports Law Review and was a representative in the Pepperdine University School of Law National Entertainment Law Moot Court Competition. She was also a recipient of the National Sports Law Institute Certificate and an inductee to the Posner Pro Bono Society. Ashley currently serves as a Board Member for the Sports & Entertainment Law Section of the State Bar of Wisconsin.
References1 Dugenske v. Wyse, 194 Wis. 159, 215 N.W.2d 829, 831
(1927). 2 Delaney v. Supr. Inv. Co., 251 Wis. 374, 378, 29 N.W.2d
754 (1947). 3 Id. at 379. 4 Bewley v. Kipp, 202 Wis. 411, 233 N.W. 71 (1930).5 Dugenske, 215 N.W.2d at 829. 6 Delaney, 251 Wis. at 382. 7 Bewley, 233 N.W. at 72.8 Id.9 Id.10 See Wis. Stat. § 101.11(1).11 Id.; see also Barry v. Employers Mut. Cas. Co., 2001 WI
101, ¶ 20, 245 Wis. 2d 560, 630 N.W.2d 517. 12 See Barry, 245 Wis. 2d 560, ¶ 21.13 Id., ¶ 28. 14 See Harnett v. St. Mary’s Congregation, 271 Wis. 603, 74
N.W.2d 382 (1956); Burling v. Schroeder Hotel Co., 235 Wis. 403, 291 N.W. 810 (1940); Washburn v. Skogg, 204 Wis. 29, 233 N.W. 764 (1930). Significantly, in all three of these cases, the injury occurred in a public building. This is in contrast to Bewley, where the court ruled that the Safe Place Statute did not apply because the injury occurred in an area exclusively controlled by the tenant. Bewley, 233 N.W. at 72.
15 See Frion v. Coren, 13 Wis. 2d 300, 108 N.W.2d 563 (1961).
16 See Bellmann v. Nat’l Container Corp. of Mich., 5 Wis. 2d 318, 92 N.W.2d 762 (1958).
17 Mair v. Trollhaugen Ski Resort, 2006 WI 61, ¶¶ 24-26, 291 Wis. 2d 132, 715 N.W.2d 598.
18 Wagner v. Cincinnati Cas. Co., 2011 WI App 85, 334 Wis. 2d 516, 800 N.W.2d 27.
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19 Barry, 245 Wis. 2d 560, ¶ 27.20 Id., ¶ 25 (citations omitted).21 See Wis. Stat. § 101.11. 22 See Boutin v. Cardinal Theatre Co., 267 Wis. 199, 202, 64
N.W.2d 848 (1954).23 See Zimmers v. St. Sebastian’s Congregation of Milwaukee,
258 Wis. 496, 501, 46 N.W.2d 820 (1951); Helms v. Fox Badger Theatres Corp., 253 Wis. 113, 118, 33 N.W.2d 210 (1948); Heiden v. City of Milwaukee, 226 Wis. 92, 102, 275 N.W. 922 (1937); Pettric v. Gridley Dairy Co., 202 Wis. 289, 290, 232 N.W. 595 (1930).
24 Wright v. St. Mary’s Hosp. of Franciscan Sisters, Racine, 265 Wis. 502, 503, 61 N.W.2d 900 (1954).
25 See Kaczmarski v. F. Rosenberg Elevator Co., 216 Wis. 553, 257 N.W. 598 (1934).
26 An employer has many obligations to its employees that fall within the classification of an “unsafe condition unassociated with the structure,” but these obligations will not be addressed in detail in this Article because the worker’s compensation statute serves as the exclusive remedy for employees against their employers. See Wis. Stat. § 102.29.
27 See Kaufman v. State St. Ltd. Partn., 187 Wis. 2d 54, 65, 522 N.W.2d 249 (Ct. App. 1994) (imposing no liability due to lack of notice).
28 See Strack v. Great A. & Pac. Tea Co., 35 Wis. 2d 51, 53, 150 N.W.2d 361 (1967).
29 Jaeger v. Evangelical Lutheran Holy Ghost Congregation, 219 Wis. 209, 262 N.W. 585 (1935).
30 Haerter v. City of W. Allis, 23 Wis. 2d 567, 571, 127 N.W.2d 768 (1964).
31 See Rosario v. Acuity, 2007 WI App 194, 304 Wis. 2d 713, 738 N.W.2d 608. The notice requirement is a challenge of its own, and a full discussion of its nuances is beyond the scope of this Article. For this reason, the notice requirement will not be addressed in great detail here. The articles written by Attorney Howard H. Boyle are a great reference point for attorneys who want to gain an in-depth understanding of the Safe Place Statute.
32 Grossenbach v. Devonshire Realty Co., 218 Wis. 633, 261 N.W. 742 (1935).
33 See Anderson v. P&G Paper Products Co., 924 F. Supp. 2d 996 (E.D. Wis. 2013) (holding that, under the Safe Place Statute, an owner is released from its statutory duty only if it relinquishes complete control of the premises to a contractor and the premises are in a safe condition at the time control is relinquished); see also Barth v. Downey Co., Inc., 71 Wis. 2d 775, 239 N.W.2d 92 (1976) (holding that the duty to furnish a safe place of employment to employees does not impose a duty on a contractor for a subcontractor’s employees; a contractor can owe a duty to a frequenter, but only when a hazardous condition is under the supervision or control of the contractor); Tryba v. Petcoff, 10 Wis. 2d 308, 103 N.W. 2d 14 (1960); Krause v. Veterans of Foreign Wars, 9 Wis. 2d 547, 101 N.W. 2d 645 (1960).
34 See Barry, 245 Wis. 2d 560, ¶ 21 n.4.35 Id., ¶ 42. 36 Dykstra v. Arthur G. McKee & Co., 100 Wis. 2d 120, 132,
301 N.W.2d 201 (1981).37 Gennrich v. Zurich Am. Ins. Co., 2010 WI App 117, ¶ 17,
329 Wis. 2d 91, 789 N.W.2d 106.38 Powell v. Milwaukee Area Tech. College Dist. Bd., 225
Wis. 2d 794, 798, 594 N.W.2d 403 (Ct. App. 1999).39 Id.40 Id. at 813. 41 Id. at 812. 42 Id. at 814. 43 Id. at 813 (“Before a person has a duty to furnish a safe
place of employment the person must have the right to present control over the place so that the person can perform the duty to furnish a safe place of employment.”) (citing Freimann v. Cumming, 185 Wis. 88, 91, 200 N.W. 662 (1924)).
44 Barry, 245 Wis. 2d 560. 45 Id., ¶ 30.46 Id.47 Wagner, 334 Wis. 2d 516.48 Id., ¶ 33.49 Id.50 Lovesee v. Allied Development Corp., 45 Wis. 2d 340, 173
N.W.2d 196 (1970). 51 Barry, 334 Wis. 2d 516, ¶ 9.52 Id. ¶¶ 43-44.
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Managing the Duty to Defend and Some Practical Approachesby: Jeff Leavell, Jeffrey Leavell S.C.
Two recent Wisconsin Supreme Court decisions have drawn attention to duty to defend decision making by insurers. In Water Well Solutions Service Group Inc. v. Consolidated Ins. Co.1 and Marks v. Houston Casualty Co.,2 the court emphasized the continuing vitality of long-standing rules regarding the duty to defend in Wisconsin, most notably the four corners rule. The decisions rejected attempts to have the court create exceptions to the four corners rule.
In Water Well, the insured wanted the duty to defend analysis to be based on just part of the liability policy, the initial grant of coverage, ignoring the exclusions. The insured also wanted extrinsic evidence to be considered, namely, an affidavit from the insured’s employee intending to invoke the subcontractor exception to the “your work” exclusion. The Wisconsin Supreme Court rejected both of the insured’s arguments, stating as follows:
Longstanding case law requires a court considering an insurer’s duty to defend its insured to compare the four corners of the underlying complaint to the terms of the entire insurance policy.... The four-corners rule prohibits a court from considering extrinsic evidence when determining whether an insurer breached its duty to defend.3
Marks stated the same rule:
The name [the “four-corners rule”] derives from the fact that “[t]he duty to defend is triggered by the allegations contained
within the four corners of the complaint” against the insured.... Put differently, “[w]hen a complaint alleges facts that, if proven, would constitute a covered claim, the insurer must appoint defense counsel for its insured without looking beyond the complaint’s four corners.” ... Thus, only two documents are germane in any four-corners analysis: the insurance policy and the complaint against the insured. No examination of extrinsic facts or evidence takes place.4
Both decisions also emphasized that the insurance policy must be read and applied in its entirety when making the duty to defend decision, not just the insuring agreement without consideration of exclusions. As the court stated in Marks: “[A] rule that an insurer who declines to provide a defense may not rely on policy exclusions to protect itself against allegations of breach of the duty to defend makes no sense.”5
Denying the Duty to Defend—“Unilaterally” Deciding is Disfavored
Insurers have long had several options when addressing the duty to defend and concluding that the duty was not invoked. The seemingly simplest option is, of course, a denial without court involvement. This approach has declined over the years, in part because of the potential consequences of a denial that is later deemed a breach by the courts. As recognized by the Wisconsin Supreme Court in Liebovich v. Minnesota Ins. Co., Wisconsin decisions have acknowledged denial as an option,
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while at the same time loudly stating a preference for the insurer to get a court declaration of no coverage instead, and warning of dire consequences if a unilateral denial is later held to be mistaken:
We emphasize the preferred process for insureds to resolve duty-to-defend disputes. As we have explained, it is well established that an insurer may request a bifurcated trial on the issue of coverage while moving to stay proceedings on the merits of the liability action until the issue of coverage is resolved. Newhouse [v. Citizens Security Mut. Ins.], 176 Wis. 2d [824, 836, 501 N.W.2d 1 (1993)] (citing Elliott [v. Donahue], 169 Wis. 2d [310, 318, 485 N.W.2d 403 (1992)]). “When this procedure is followed,” we explained, “the insurance company runs no risk of breaching its duty to defend.” Newhouse, 176 Wis. 2d at 836. In addition to the Elliott/Newhouse procedure, insurers may raise the coverage issue in other ways, such as seeking a declaratory ruling or agreeing to provide a defense under a reservation of rights. See Baumann [v. Elliott], [2005 WI App 186, ¶ 8], 286 Wis. 2d 667, [] 704 N.W.2d 361. While these procedures are not absolute requirements, we strongly encourage insurers wishing to contest liability coverage to avail themselves of one of these procedures rather than unilaterally refuse to defend. A unilateral refusal to defend without first attempting to seek judicial support for that refusal can result in otherwise avoidable expenses and efforts to litigants and courts, deprive insureds of their contracted-for protections, and estop insurers from being able to further challenge coverage.6
Clearly the preferred process from the perspective of the court is a declaratory action for judicial confirmation of the insurer’s conclusion that there is no duty to defend, not unilateral insurer decision making. Obviously, that cannot be obtained without some risk, delay, and expense, which at times can be substantial. So, what is an insurer to do when it
believes it has no coverage for the suit and no duty to defend?
Intervention, Stay, and Bifurcation
The traditionally endorsed response is for the insurer seeking a declaration of no duty to defend to move promptly to intervene and secure a stay and bifurcation for insurance issues to be addressed immediately while the merits of the case are stayed—i.e., all merits discovery and proceedings are put on hold. Wisconsin decisions have held that when an insurer takes that approach, there is no breach of the duty to defend:
[T]he proper procedure for an insurance company to follow when coverage is disputed is to request a bifurcated trial on the issues of coverage and liability and move to stay any proceedings on liability until the issue of coverage is resolved. When this procedure is followed, the insurance company runs no risk of breaching its duty to defend.7
When the insurer promptly moves to intervene, stay, and bifurcate, this should, at least theoretically, result in the insured having no need for a defense during the time of the stay and bifurcation. The duty to defend issue is then commonly decided via summary judgment.
Wisconsin decisions have not stated expressly that the stay must be obtained, but rather that the stay must be sought. So, for example, in Newhouse the court said that the insurer that moves for stay and bifurcation does not hazard being accused of breaching a duty to defend. The decision did not describe whether that stay had to be granted, or not. But what if the stay is denied? Or, what if the court will not assign a prompt hearing? In both circumstances the insured likely needs a defense, if only to answer, or respond to interrogatories or document requests served with the complaint. The insurer that does not provide a defense under that circumstance hazards the breach accusation.
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In some instances insureds have opposed the stay, contending that they want to engage in early motion practice, e.g., a motion to dismiss. If the court refuses the stay, and then denies that motion to dismiss, the insured will argue that the motion work should be paid for by the insurer. This argument is made even though the dismissal motion practice should not have occurred in the first instance. The principles motivating the court’s desire for early resolution of coverage disputes are sacrificed for the supposed quick dismissal that invariably ends up faltering. To avoid this and stay true to the supreme court’s guidance, circuit courts should be granting stays without exception. Unfortunately, that does not always happen.
Defense at the Insurer’s Expense under a Reservation of Rights
When the stay and bifurcation cannot be quickly obtained, and even in some cases when they can be, an added precaution to protect both the insured’s defense and the insurer against a breach claim would be for the insurer to retain defense counsel under a reservation of rights. The reservation of rights need not be in writing, although a writing certainly clarifies the insurer’s intent, informs the insured, and builds the right expectations, which is generally a good thing that the supreme court prefers:
We strongly urge insurers to communicate with their insureds about their potential coverage defenses, but we do not see the failure to issue a reservation of rights letter as grounds to require an insurer to provide insurance coverage that does not otherwise exist in the insurance contract.8
So, the insurer wishing to intervene and pursue a stay and judicial declaration has a choice to make: either (1) attempt immediately to secure a stay, by motion or party consent without hiring defense counsel; or (2) incur the expense of defense counsel under a reservation of rights during the pendency of the stay and bifurcation.
Pragmatic Alternatives
What are the sensible options when the intervention, stay, and bifurcation approach appears costly, particularly when compared to the plaintiff’s claimed damages, or when the stay likely cannot be granted quickly?
A. The Tender Withdrawal
I have increasingly found a preliminary step to be helpful, one that can attain the desired result at lesser expense. The insurer should have counsel call or write to the insured, or to the plaintiff and to the insured, to explain in detail why there is no duty to defend and supply a certified copy of the policy so that they can see it for themselves, and then ask them to withdraw their tender of defense in writing, essentially stipulating to the lack of a duty to defend. My initial approach is worded something like the following, to be followed by detailed application of the four corners rule, applying the policy to the complaint:
I am writing to you and providing the policy in the hope that you will agree there is no duty to defend or indemnify under the policy. I am hopeful we can reach agreement on that and that you would withdraw the tender, because if you do not then the insurer may have me intervene and seek a stay and summary judgment on insurance coverage, which would entail time and expense for your client and mine that should be unnecessary.
Counsel for the plaintiff and for the insured have agreed to this more frequently than you might expect. Perhaps it is because they recognize the strength of the insurer’s position and do not want to incur substantial unnecessary expense litigating coverage under a stay. Also, sometimes this approach works because the insured has a trusted regular defense counsel already engaged and they do not want to lose the choice of counsel or control. Another factor might be the availability of other insurers for a defense, something common in construction or environmental litigation where
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damages arguably stretch over a period of time and through several policies.
This tender withdrawal approach should be done quickly and if possible before responsive pleadings, like an answer, must be served. Remember, the insured’s tender withdrawal is only half the battle, because the plaintiff will still possess a direct action claim against the insurer, regardless of the insured’s position. That is, the insured’s stipulation to no coverage does not bind the plaintiff. Consequently, you will want to obtain the plaintiff’s stipulation as well in order to better secure complete litigation peace.
B. The Negative Enrollment
One variant of this approach in an action where the insurer is not a named party is the negative enrollment, which has benefits and detriments. Counsel for the insurer writes to the insured explaining in detail why there is no duty to defend, enclosing the certified policy and advising that if the insurer has not heard back within a stated period of time, say ten days, the insurer will assume that the insured is in agreement that there is no duty to defend. Of course, an insured’s silence is not express agreement, but it will also be true that the insurer has communicated with the insured as suggested by the Wisconsin Supreme Court in Towne Realty, Inc. v. Zurich Ins. Co.: “[I]f it is unclear or ambiguous whether the insured wishes the insurer to defend the suit, it becomes the responsibility of the insurer to communicate with the insured before the insurer unilaterally forgoes the defense.”9 And, the insured rightfully has a responsibility to respond, consistent with the burden placed on the insured in the first instance to establish coverage.10
This negative enrollment approach does leave the insurer with less than complete closure, in that the plaintiff could obtain a judgment and then pursue collection on it under the direct action statute. But the risk of that happening may be small, especially if the plaintiff did not name the insurer in the original suit. There is also the risk that the insured does not get the communication, or does not understand it, and fails to respond. It seems likely, though, that a
court would not penalize the insurer in that instance, especially if the explanation was clear and plainly worded.
C. Stipulated Bifurcation and Stay Plus Indefinite Extension to Answer
Yet a third method to obtain a comparably desirable result with lesser expense is to immediately seek the plaintiff’s and the insured’s stipulation to intervention, stay, and bifurcation with an indefinite extension of time on the answer, so that the insurer can quickly move to summary judgment and avoid both the costs and risks of stay and bifurcation motion practice, and the cost of paying for counsel under a reservation of rights to defend the insured. The stipulation should be memorialized in a way that promotes expedition. I prefer an order under the five day rule in this circumstance.
All these approaches have support in Wisconsin decisions, although perhaps not expressed directly in them. For example, the agreement of an insured to withdraw a tender of defense to its insurer upon its request is a natural consequence of the communication suggested by the supreme court in Towne Realty. As another example, a stipulation to intervention, stay, and bifurcation protects the insured from the unnecessary expenses and efforts warned of in Liebovich.
D. Additional Considerations
Other accessories to these options can be employed as well. You may find efforts with the insured and plaintiff to be aided by reassurance that if pleadings are amended, they always have the right to retender their claims. In fact, this right is arguably their duty under the policy language anyway, which frequently requires an insured to “immediately send” to the insurer “copies of any legal papers received in connection with the claim or suit.”11 The reassurance should be tempered by an admonition that the facts alleged are dispositive, not labels or theories of liability. For example, labelling a cause of action “negligence” in an amended complaint does not transform the underlying intentional conduct into an accident to invoke a duty to defend.12
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The insurer may also expressly reserve the right to recoup defense costs that it has paid under a reservation of rights if its position on the duty to defend is ultimately confirmed by court declaration. This gives some protection to the insurer against runaway defense expenses, which is particularly valuable if the insurer has allowed the insured to select counsel and is not controlling the defense. The recoupment threat serves to moderate uncontrolled defense conduct and expense. At least one Wisconsin decision has noted the possibility of such a recoupment.13 Other states like California have expressly allowed the recoupment under an unjust enrichment theory,14 with courts in some states like Minnesota conditioning it on a written reservation of rights letter stating the insurer’s intent to seek the recoupment if successful in pursuing a declaratory judgment.15 The insurer may also have business considerations that factor into whether to state that it is reserving its right to recoupment. That said, failure to state the reservation, in both a reservation of rights letter and in the intervenor complaint, may waive it.
The Cost Effectiveness Factor
The implementation of the duty to defend decision will likely be impacted by the perceived size of the claim. This is particularly so in seemingly small-dollar construction cases. If the claim is for a modest amount of home or building repair work, does it warrant the expense of a motion for intervention, stay, and bifurcation, and then summary judgment proceedings? A flat denial might appear more cost effective, yet it is possibly dangerous. We have at times in these situations sought to slow the process down to facilitate settlement with some insurer and insured participation. We propose to the plaintiff an indefinite extension of time for the insured to respond to the complaint, while demonstrating to the insured the lack of coverage but offering to discuss a modest insurer contribution to a settlement package. Quick telephone negotiation, or perhaps even formal mediation, all with an express reservation of rights, can produce a quick, cost-effective resolution.
Leaving the Four Corners
Deciding to provide a defense under a reservation of rights may take you outside of the four corners rule, a risk you should recognize. This risk is anticipated in the language of some supreme court decisions, such as Olson v. Farrar:
[T]he purpose of the four-corners rule has been served once the insurer has elected to provide a defense pending a final determination on coverage. At that point, the insurer has protected its insured by providing a defense. The insurer has also protected itself from liability for a breach of contract. The four-corners rule is not further implicated, and the court proceeds to a determination of coverage.16
The risk of leaving the confines of the four corners is that the insured may submit affidavits or other evidence to cloud the court’s analysis of the duty to defend, as was attempted in Water Well. Some courts might be confused into allowing an insured’s affidavit to make ambiguous what is otherwise clear in the complaint. A historical example can be found in Berg v. Fall.17 The law for many years, articulated in Berg, was that a complaint alleging a battery injury—i.e., a fight where the plaintiff alleged the defendant intended to injure—would require a defense if the defendant raised self-defense as a defense via affidavit. Later Wisconsin Supreme Court decisions effectively overruled Berg as an improper deviation from the four corners rule.18 However, the same result might occur now if the insurer defends the suit under a reservation of rights while simultaneously moving for summary judgment declaring no duty to defend. The insured might point to the language in Olson and argue that an affidavit of self-defense properly suggests an “occurrence” or accident imposing a duty to defend. Will the court then feel compelled to see a fact issue on occurrence and require a defense? If it does, the court has effectively reinstated Berg, contravening the spirit, if not the word, of the four corners rule.
When the court is presented with this issue, counsel should make clear that hiring a defense
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lawyer under reservation of rights does not open the floodgates to extrinsic evidence offered by an insured to cloud or alter the complaint allegations. In Kreuger International, Inc. v. Federal Ins. Co., the Eastern District of Wisconsin noted that “an insurer is hardly blameworthy for defending under a reservation of rights, given the potential liability it faces for breach of contract.”19 The insurer’s hiring of a defense lawyer under a reservation of rights is merely an extra precaution, not a concession that the duty to defend might be invoked. An insurer’s hiring of a defense lawyer, after all, is protective of an insured’s interest, something the courts generally like. The insurer should not suffer the loss of the four corners rule and its clarity just because it acted to protect the insured’s interest while it went about asking for declaratory judgment on the duty to defend.
Olson suggests that the court may move past the four corners rule in its analysis when discovery has occurred and the case is headed toward a coverage trial.20 By contrast, where no, or limited, discovery has occurred and a stay is then imposed, the court’s duty to defend analysis is more appropriately guided by the four corners rule, particularly when the insurer promptly moves to have the duty to defend decided based only on a comparison of the complaint to the policy.
Jeff Leavell was admitted to the Bar in 1983. He graduated from the University of Chicago, with honors, in 1980, and the University of Wisconsin Law School, J.D., cum laude, in 1983. He was judicial law clerk for the Wisconsin Court of Appeals District IV from 1983-1985.
Mr. Leavell is a frequent lecturer and author, and has spoken to numerous Civil Trial Counsel of Wisconsin Conferences and Wisconsin Defense Counsel Conferences over the last two decades. He regularly represents insurers and other parties in duty to defend disputes, in Wisconsin and other states and federal venues. Some recent duty to defend decisions include Smith v. Anderson, 2016 WI App 16; Weis v. Kapinos, 2015 WI App 37; Schinner v. Gundrum, 2013 WI 71; Sawyer v. West
Bend Mut. Ins. Co., 2012 WI App 92; Flejter v. West Bend Mut. Ins. Co., 2010 WI App 174; Martinez v. Calimlim, 739 F. Supp. 2d 1142 (E.D. Wis. 2010). He is the principal and founder of Jeffrey Leavell, S.C., established in 1994.
Mr. Leavell is a Board Certified Civil Trial Specialist by the National Board of Trial Advocacy. He has been elected by his peers as “Superlawyer” every year since 2006 as published in Milwaukee Magazine. Jeffrey Leavell, S.C., has been recognized annually since 1995 by Martindale-Hubbell in its Bar Register of Preeminent Lawyers as a most distinguished law practice, achieving the highest level of legal and ethical standards. He served on the Board of Governors of the Racine County Bar Association, and is past President of the Racine County Bar Association. He is past President of the Wisconsin Defense Counsel.
References1 Water Well Sols. Serv. Grp. Inc. v. Consol. Ins. Co., 2016
WI 54, 369 Wis. 2d 607, 881 N.W.2d 285.2 Marks v. Hous. Cas. Co., 2016 WI 53, ¶ 39, 369 Wis. 2d
547, 881 N.W.2d 309.3 Water Well, 369 Wis. 2d 607, ¶ 15 (internal citations
omitted).4 Marks, 369 Wis. 2d 547, ¶ 39 (quoting Estate of Sustache v.
Am. Family Mut. Ins. Co., 2008 WI 87, ¶¶ 20, 27, 311 Wis. 2d 548, 751 N.W.2d. 845).
5 Id., ¶ 71.6 Liebovich v. Minn. Ins. Co., 2008 WI 75, ¶ 55, 310 Wis. 2d
751, 751 N.W.2d 764.7 Newhouse v. Citizens Sec. Mut. Ins. Co., 176 Wis. 2d 824,
836, 501 N.W.2d 1 (1993) (internal citation omitted). 8 Maxwell v. Hartford Union High Sch. Dist., 2012 WI 58, ¶
2, 341 Wis. 2d 238, 814 N.W.2d 484. 9 201 Wis. 2d 260, 269, 548 N.W.2d 64 (1996).10 Day v. Allstate Indem. Co., 2011 WI 24, ¶ 26, 332 Wis. 2d
571, 798 N.W.2d 199 (“The insured bears the burden of showing an initial grant of coverage.”).
11 See, e.g., ISO Form CG 00 01 12 07, p. 11 of 16. 12 The court succinctly noted this in James Cape & Sons Co.,
2009 WI App 154, ¶ 16, 321 Wis. 2d 604, 775 N.W.2d 117, that “[t]he duty to defend arises from the allegations within the four corners of the complaint ... [and] our focus is on the facts alleged, the incidents giving rise to the claims, not ... [the] theory of liability.”
13 Kreuger Int’l, Inc. v. Fed. Ins. Co., 647 F. Supp. 2d 1024, 1043-44 (E.D. Wis. 2008).
14 See Buss v. Superior Court of Los Angeles, 939 P.2d 766 (Cal. 1997).
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15 See, e.g., Knapp v. Commonwealth Land Title Ins. Co., 932 F. Supp. 1169, 1172 (D. Minn. 1996). But see Westchester Fire Ins. Co. v. Wallerich, 527 F. Supp. 2d 896, 908 (D. Minn. 2007) (“[T]his Court is of the view that the Minnesota Supreme Court would refuse to allow reimbursement unless an agreement to the contrary is found in the insurance policy.”); Gen. Agents Ins. Co. of Am., Inc. v. Midwest Sporting Goods Co., 828 N.E.2d 1092, 1104 (Ill. 2005) (“In sum, we acknowledge that a majority of jurisdictions have held that an insurer is entitled to reimbursement of defense costs when (1) the insurer did not have a duty to defend, (2) the insurer timely and expressly reserved its right to recoup defense costs, and (3) the insured either remains silent in
the face of the reservation of rights or accepts the insurer’s payment of defense costs. We choose, however, to follow the minority rule and refuse to permit an insurer to recover defense costs pursuant to a reservation of rights absent an express provision to that effect in the insurance contract between the parties.”).
16 Olson v. Farrar, 2012 WI 3, ¶ 34, 338 Wis. 2d 215, 809 N.W.2d 1.
17 138 Wis. 2d 115, 405 N.W.2d 701 (Ct. App. 1987).18 Doyle v. Engelke, 219 Wis. 2d 277, 284 n.3, 580 N.W.2d
245 (1998). 19 647 F. Supp. 2d at 1044-45.20 Olson, 338 Wis. 2d 215, ¶¶ 35-37.
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Court of Appeals Clarifies Liability Under Wisconsin’s Patient Confidentiality Lawsby: Ryan M. Wiesner, Leib Knott Gaynor LLC
The Wisconsin Court of Appeals recently issued a decision clarifying when a health care provider can face liability under Wisconsin law for failing to maintain the confidentiality of patient health care records. In Wall v. Pahl,1 the court of appeals, in a published decision, determined that a health care provider or its employees cannot be sued for violating Wis. Stat. § 146.82(1) by merely accessing a patient’s records without consent or a valid exception. The court instead interpreted § 146.82(1) as requiring release or disclosure of the patient’s protected health information outside of the organization holding the records for liability to arise. The decision will hopefully reduce the number of HIPAA-based civil lawsuits filed in Wisconsin and help health care providers avoid exposure when an employee reviews a record but simply cannot recall the reason for doing so when litigation is commenced years later.
Wisconsin’s patient confidentiality laws, codified in Wis. Stat. ch. 146, incorporate the federal Health Insurance Portability and Accountability Act’s (HIPAA) general requirement concerning safeguarding patient information. Health care providers, including hospitals and other medical organizations, are required pursuant to Wis. Stat. § 146.82(1) to keep patient health care records confidential, with release of information only permitted with a patient’s informed consent or pursuant to a valid statutory exception. Wisconsin adopts HIPAA’s health care operations exception and provides a list of over 20 other valid reasons for releasing patient information.2
However, Wisconsin law, unlike its federal counterpart, also creates a private cause of action for violations and exposes violators to significant liability.3 Wisconsin Stat. § 146.84(2) awards successful plaintiffs their compensatory damages, exemplary damages of $1,000.00 for a negligent infraction or $25,000.00 for an intentional infraction and, most importantly, actual attorney’s fees.4
Just what conduct can expose a health care provider to liability for violating Wis. Stat. § 146.82(1) was subject to debate prior to the Wall decision. Litigants argued over whether a health care provider’s unlawful access alone was sufficient to state a valid claim or whether the plaintiff also had to prove outside disclosure of the information. At least one circuit court had come down in favor of patients, holding that, based on the language of § 146.82(1) requiring that health care records “shall remain confidential,” access, without disclosure, was sufficient to state a claim.5
In Wall, the court of appeals decided in favor of health care providers, holding that access alone is not enough, and that outside disclosure is also necessary. As a published decision no longer subject to review by the Wisconsin Supreme Court (no petition for review was filed), Wall is now statewide precedent.
The Wall Decision
The Wall case arose from the predominant fact pattern that had been driving litigation arising from a health care provider’s alleged violation of Wis. Stat. § 146.82(1). The plaintiff, Daniel Wall, was a past
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patient of Gundersen Lutheran Health Systems.6 He requested an audit trail listing all Gundersen staff who accessed his health care records and, after obtaining the results, learned that Gundersen employees Marion Pahl and Jacquelyn Schimke “accessed and observed” his medical records.7 The facts in the Wall decision do not clarify the relationship between Wall, Pahl, or Schimke, or exactly what type of medical information Pahl and Schimke accessed, but the parties did not dispute that Pahl and Shimke did not have Wall’s consent prior to accessing his records, nor did they have a valid reason under HIPAA or Wisconsin law for doing so.8 Wall even requested that Gundersen investigate and disclose the health care reason for Pahl and Schimke’s access, but Gundersen never released that information to him.9
Wall sued Pahl, Schimke, and Gundersen for, among other things, violating Wis. Stat. § 146.82(1), and requested punitive damages under § 146.84(2)—which would have entitled Wall, if able to prove that Pahl and Schimke’s access was intentional, to up to $25,000.00 from each of them.10 Wall’s complaint alleged only that the Gundersen employees accessed his records, but was silent as to whether they released or disclosed any information they learned from those records outside the organization.11 In fact, in later filings, Wall confirmed that his statutory claims against Pahl and Schimke stemmed solely from their failure to gain his informed consent before accessing his records and that he was not alleging that any outside disclosure occurred.12
Pahl and Schimke moved to dismiss Wall’s claims for statutory violations, arguing that Wis. Stat. § 146.82(1) required release or disclosure of Wall’s records outside of the organization in order for liability to ensue. Since Wall’s complaint did not allege that his records were disclosed outside the organization, Paul and Schimke argued that Wall’s complaint failed to state valid claims for statutory violations. The trial court agreed and granted their motion to dismiss.13
Wall appealed. The court of appeals was ultimately tasked with clarifying whether a health care provider
can violate Wis. Stat. § 146.82 by simply accessing a patient’s record, or if release or disclosure of the patient-plaintiff’s record is also required. The statutory language at issue, § 146.82(1), provides in relevant part as follows:
All patient health care records shall remain confidential. Patient health care records may be released only to the persons designated in this section or to other persons with the informed consent of the patient or of a person authorized by the patient.14
The Gundersen employees pointed to the term “released” and argued that, to violate § 146.82(1), Wall needed to allege and prove that they released or disclosed his records to someone outside of their health care organization.15 In response, Wall contended that the first sentence of the statute—that records “shall remain confidential”—made mere access sufficient to state a claim and did not also require outside disclosure.
The court of appeals agreed with the defendants, affirmed the trial court, and dismissed Wall’s statutory claims. The court recognized that Wis. Stat. ch. 146 did not define the term “released,” so it reviewed dictionary definitions of the term and its use in other sections in Chapter 146 and HIPAA.16 Importantly, the court noted that the term “released” was synonymous with “disclosure” as used in HIPAA regulations, 45 CFR § 160.103, and that disclosure meant to disseminate information “outside the entity holding the information.”17 But it also found that the term was used in contrary ways in other state and federal statutes. The court therefore decided on an interpretation of the term “released” that it believed was reasonable in order to “avoid absurd or unreasonable results.”18
The court held that the statute’s use of the term “released” required the dissemination or disclosure of the patient’s records outside the organization holding the records.19 The court held that simply accessing a patient’s record without consent or pursuant to a valid exception did not amount to a violation of Wis. Stat. § 146.82(1). The court
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explained the reasoning behind its interpretation in a hypothetical that highlighted the difficulty posed by defending a breach of confidentiality claim years after the alleged access occurred:
When sued by a patient, possibly years after the fact, an employee would be faced with the difficult, potentially impossible, task of proving why he or she accessed a particular patient record in order to show that the access fell within one of the permissible circumstances set forth in § 146.82(2).20
Simply put, the court felt that a health care provider should not face liability under Wis. Stat. § 146.82(1), and possible punitive damages, simply because it was unable to recreate an employee’s access and the employee could not recall the reason for the same. A provider, rather, should be liable only if its employees accessed and disclosed protected information to the public.
Maybe the most important takeaway from the court’s decision is that the underlying reason for the health care provider’s access in not important. So, even though Pahl and Schimke did not have Wall’s consent or a valid purpose for accessing his records, they were still free from liability because they did not disclose the information in any way.
The court of appeals’ decision did not mean that the defendants walked away unscathed, however. Wall argued that precluding otherwise valid claims against a health care provider because the information was not released would give health care providers carte blanche to access any records without consequence so long as they only shared the information internally. The court disagreed with Wall and recognized that a health care provider’s internal access to records is not the type of conduct governed by Wisconsin law.21 Rather, the protection of patient information and access that occurs within an organization is regulated by HIPAA. And while HIPAA does not permit a private cause of action for unlawful access, such conduct is still subject to civil and criminal penalties enforced by the Office for Civil Rights—the entity responsible for enforcing
HIPAA’s security and privacy rules.22 So Pahl and Schimke, while avoiding civil liability in state court, still subjected Gundersen to federal fines. And of course, they also faced possible termination or other discipline from their employer or a licensing agency such as the Wisconsin Board of Nursing or Department of Safety and Professional Responsibility.
The court also discussed the potential ramifications that Wall’s interpretation of Wis. Stat. § 146.82(1) could have on health care organizations. Such claims, while usually based on a single employee’s access, are oftentimes attacks on an organization’s policies and practices. For example, an aggrieved patient could argue that the organization failed to provide proper confidentiality training to its employees or failed to prevent access to records beyond the duties of a certain job role. The Wall court recognized the inherent difficulty with defending these allegations. The court noted that holding a hospital liable any time an employee accessed a record would result in hospitals being
forced to put in place systems that either verified an employee’s access was permissible each time he or she tried to access a patient record or required the employee to document his or her reasons for accessing a record each time he or she did so.23
Requiring such policies or practices would “place too unreasonable a burden” on hospitals and their employees.24 The court stated that it could not “fathom that the legislature intended to impose that type of burden when it enacted Wis. Stat. § 146.82.”25
Conclusion
The Wall decision represents a strong position in favor of health care providers. The decision takes into account the difficulty of defending HIPAA-based breach cases years after the conduct actually takes place. It also recognizes that a health care organization should not be held to an impossible
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standard when safeguarding patient information, especially in light of federal monetary penalties that are already in place to deter less harmful internal access.
Ryan Wiesner is an associate with the newly founded Leib Knott Gaynor LLC out of Milwaukee. Ryan focuses on defending complex litigation in state and federal courts across the country, mostly representing clients in matters involving professional negligence, civil rights, products liability, and commercial disputes. He can be contacted at [email protected].
References1 2016 WI App 71, ___ Wis. 2d ___, ___ N.W.2d ___.2 Wis. Stat. § 146.82(1) and (2).3 See Wis. Stat. §§ 146.82, 146.83, 146.84.4 Wis. Stat. § 146.84(2)(a) and (b).5 See Gulotta v. Thedacare, Inc., et al., Outagamie County
Circuit Court case no. 12-CV-1482.
6 2016 WI App 71, ¶ 3. 7 Id.8 Id.9 Id., ¶ 4.10 Id., ¶ 5.11 Id.12 Id., ¶ 6.13 Id., ¶¶ 6-7.14 Wis. Stat. § 146.82(1) (emphasis added).15 2016 WI App 71, ¶ 11.16 Id., ¶¶ 14-19, 21.17 Id., ¶ 16.18 Id., ¶¶ 17-21 (citing State ex. rel. Kalal v. Circuit Court for
Dane County, 2004 WI 58, 271 Wis. 2d 633, 681 N.W.2d 110).
19 Id., ¶ 21.20 Id., ¶ 22.21 Id., ¶ 25.22 Id., ¶¶ 24-25 (citing Seaton v. Mayberg, 610 F.3d 530, 533
(9th Cir. 2010)).23 Id., ¶ 23.24 Id. (quoting Colla v. Mandella, 1 Wis. 2d 594, 599, 85
N.W.2d 345 (1957)).25 Id.
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Recent Wisconsin “Occurrence” Decisions Need Clarificationby: Mollie T. Kugler, Hinshaw & Culbertson LLP
Introduction
Today, standard liability insurance policies require an occurrence to trigger coverage. The common definition of occurrence is “an accident, including continuous or repeated exposure to substantially the same general harmful conditions,” or something substantially similar. While policies have not always contained a specific occurrence requirement, policies have historically required that the bodily injury or property damage for which coverage was sought result from an accident. Since 2013, the Wisconsin Supreme Court has decided four cases on the issue of what constitutes an occurrence to trigger insurance coverage under a liability policy. Instead of clarity, however, these four cases have resulted in confusion.
History of the Definition of Occurrence in Liability Policies1
Before 1966, standard liability policies had no occurrence requirement. Instead, the policies required the insured to prove that the bodily injury or property damage resulted from an accident. Accident was interpreted to mean a sudden, identifiable event.2 In 1966, policies were changed to include the word occurrence, and occurrence was defined as “an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.”3 In 1986, the definition of occurrence was changed again. In particular, the phrase “not expected or intended from the standpoint of the insured” was moved—from the definition of occurrence
in the insuring agreement to the intentional acts exclusion.4 Thus, a brief review of the history of the definition of occurrence in liability policies shows the historical focus on whether an accident took place from the standpoint of the insured.5
Four Wisconsin Supreme Court Decisions Analyzing Occurrence since 2013
Since 2013, the Wisconsin Supreme Court has decided four cases on the issue of what constitutes an occurrence to trigger insurance coverage under a liability policy.
Schinner v. Gundrum6
In Schinner, decided July 12, 2013, the Wisconsin Supreme Court was tasked with determining whether there was an occurrence to trigger coverage under a liability insurance policy in the factual context of a guest assaulted by a third party at an underage drinking party held at a shed at the insured’s family-owned business.7 The insurance carrier argued that it had no duty to defend and indemnify the insured because his actions as a party host were intentional, such that there was no occurrence to trigger coverage.8
The insuring agreement of the policy provided coverage for “damages because of ‘bodily injury’ or ‘property damage’ caused by an ‘occurrence’ to which this coverage applies.”9 The policy defined occurrence as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”10 The policy did not define accident.11
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To determine whether there was an occurrence, the court took a two-step approach. First, it considered the appropriate standpoint from which to determine whether an injury is accidental. Second, it considered what constitutes an accident. The court determined that the appropriate standpoint from which to determine whether an injury is accidental is the standpoint of the insured, not the injured party:
Analyzing an accident from the standpoint of the injured party goes against recent insurance decisions in Wisconsin, which considered whether the insured acted with lack of intent in a particular situation. This approach is consistent with the idea that a court should interpret an insurance policy from the standpoint of a reasonable person in the position of the insured. Moreover, when interpreting an insurance contract a court should give effect to the intentions of the parties, not the intent of a third party.12
With this in mind, the court turned to what constitutes an accident, determining that the means or cause of the “injury-causing event” must be accidental, not the result: “A result, though unexpected, is not an accident; the means or cause must be accidental.”13 The court further noted that, as a general rule, there is no insurance coverage for injury resulting when an insured acts intentionally to cause bodily harm to another.14 The court also looked to public policy, noting that public policy weighed against finding an occurrence and allowing the host to escape responsibility for his intentional and illegal actions.
The court concluded that there was no occurrence under the policy:
We conclude that [the insured’s] intentional actions in hosting a large underage drinking party—actions that were illegal—and providing alcohol to an individual known to become belligerent when intoxicated, were a substantial factor in causing [the guest] bodily injury. These causes were not accidental. Since there was no occurrence under the homeowner’s policy, there was
no initial grant of coverage to [the insured] under the policy.
Notably, while the dissent, authored by Justice Bradley, agreed with the majority on the appropriate standpoint from which to determine whether an injury is accidental and what constitutes an accident, it urged the opposite result—a finding that there was an occurrence to trigger insurance coverage. The dissent reasoned as follows:
As even the majority acknowledges, there is nothing in the record that suggests that [the insured] intended the assault or any subsequent injury to [the guest]. Accordingly, when viewed from the standpoint of the insured, the assault was unintended and was an ‘accident,’ constituting an ‘occurrence’ under the policy.15
Wilson Mutual Insurance Company v. Falk16
Approximately one and one-half years after Schinner, the Wisconsin Supreme Court decided (on the same day—December 30, 2014) two insurance coverage cases involving pollution-type property damage. One issue facing the court in both cases was whether there was an occurrence to trigger insurance coverage.
The first case, Wilson Mutual, involved a determination of whether well contamination caused by spreading manure as fertilizer constituted an occurrence to trigger insurance coverage.17 The insureds sought coverage for claims from their neighbors that they had negligently spread manure on their property and polluted their neighbors’ wells.18 The insureds sought coverage for each contaminated well, not the spreading of manure. The court accepted this argument, concluding that an occurrence took place “each time a unique well was contaminated,” as opposed to the single occasion of “the spreading of manure as fertilizer.”19
The insuring agreement of the two farm owner policies provided coverage for “‘bodily injury’ or ‘property damage’ caused by an ‘occurrence.’”20 The policy defined an occurrence as “an accident,
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including repeated exposures to similar conditions, that results in ‘bodily injury’ or ‘property damage’ during the policy period.”21 The policy did not define accident.22
The court noted that Wisconsin is in the “jurisdictional majority” of states that define an occurrence as “unexpected or resultant damage.”23 On this basis, the court determined that because the seepage of manure into the wells was not expected or intended, the well contamination was an accident, and the exposure of manure to each unique well constituted an occurrence under the insurance policy.24 It is worth noting, though, that when determining how many occurrences had taken place, the court stated, “Wisconsin has adopted the ‘cause theory’ to determine the number of occurrences.”25
Notably, both the concurrence, authored by Justice Bradley, and the dissent, authored by Justice Abrahamson, criticized the majority’s analysis of occurrence. Justice Bradley agreed with the majority that Wisconsin defines an occurrence as “unexpected or unintended resultant damage,” and also agreed with the majority’s application of that definition to the facts of the case, but disagreed with the majority when it “stray[ed] from its original occurrence analysis and inconsistently state[d] that Wisconsin has adopted a cause theory.”26 Justice Abrahamson was critical that the majority’s approach to occurrence was inconsistent with the court’s approach to the issue in Preisler, the other case being decided simultaneously with Wisconsin Mutual and discussed below, and asked that her dissents in the two cases be read together.27
Preisler v. General Casualty Insurance Company28
Preisler involved a determination of whether decomposing septage seeping into the water supply constituted an occurrence to trigger insurance coverage.29 The complaint brought by the insureds’ neighbors alleged that the insureds (a septic pumping service) negligently applied and stored the septage, which seeped into the neighbors’ water supply.30
The insuring agreements of the commercial and contractor general liability policies provided coverage for “‘bodily injury’ or ‘property damage’ caused by an ‘occurrence.’”31 The policies defined occurrence as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”32 The court looked to Couch on Insurance for “its description of ‘occurrence’” in pollution exclusion cases:
Due to the fact that most policies define an “occurrence” to mean an “accident,” the pollution coverage issue often turns upon the intent of the insured. In making this determination, jurisdictions have focused on different aspects of the polluting process to assess the mindset of the insured. Most courts have focused on the damage caused by the pollution and have concluded that there is an occurrence when the insured did not expect or intend the resultant damage.33
The court then considered whether the circumstances fell within the policy definition of occurrence, noting that “[a] result, though unexpected, is not an accident; the means or cause must be accidental.”34 The court determined that the accident was the seepage of decomposing septage into the neighbors’ water supply and that, because the seepage was not intended, anticipated, or expected, the seepage constituted an occurrence to trigger insurance coverage.35
Like in Wilson Mutual, both the concurrence, authored by Justice Bradley, and the dissent, authored by Justice Abrahamson, criticized the majority’s analysis of occurrence. Justice Bradley was critical that the majority’s approach to occurrence was both unclear and inconsistent with Wilson Mutual, “a case decided on the same day, on the same issue”:
It is unclear whether the majority is embarking on a cause approach or damage approach in determining what constitutes an occurrence…. [T]he majority appears to take a cause approach to occurrence.
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This conflicts with the apparent approach embraced in Wilson Mutual, which we also release today. Wilson Mutual acknowledges that “Wisconsin is in the jurisdictional majority in defining an occurrence as unexpected or unintended resultant damage.” Which precedent should future attorneys follow?36
Again, Justice Abrahamson was critical that the majority’s approach to occurrence was inconsistent with the court’s approach to the issue in Wilson Mutual and asked that her dissents in the two cases be read together.37
Wisconsin Pharmacal Company, LLC v. Nebraska Cultures of California, Inc.38
In Wisconsin Pharmacal, decided on March 1, 2016, the court considered whether there was an occurrence to trigger insurance coverage in the factual context of supplying an incorrect ingredient to be incorporated into a dietary supplement and a claim that supplying the incorrect ingredient was a breach of contract.39 The insuring agreement of the Netherlands CGL policy provided coverage for “‘bodily injury’ or ‘property damage’ … caused by an ‘occurrence.’”40 The policy defined occurrence as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”41 The policy did not define accident.42
The court focused on what constituted the occurrence:
While [the insured] intentionally provided a probiotic ingredient, the parties do not dispute that [the insured’s] provision of a defective ingredient was accidental. However, we are not persuaded, simply because [the insured] accidently supplied a defective ingredient, that this constitutes an “occurrence” for purposes of coverage under the policy.43
After surveying several Wisconsin cases, the court explained that an action may give rise to injury or property damage caused by an occurrence without
the action itself constituting an occurrence.44 Accordingly, the court concluded that, while a breach of contract may give rise to property damage caused by an occurrence, a breach of contract, standing alone, does not constitute an occurrence.45 Thus, the court determined that accidentally providing a defective ingredient did not constitute an occurrence in and of itself, such that there was no occurrence to trigger coverage under the Netherlands policy.46
The dissent, authored by Justice Abrahamson, disagreed with the majority, finding that providing the wrong probiotic bacteria was an occurrence to trigger insurance coverage under the Netherlands policy.47
Conclusion: “Which Precedent Should Future Attorneys Follow?”48
As discussed above, there are two parts of the occurrence analysis: (1) the appropriate standpoint from which to consider whether an injury is accidental; and (2) what constitutes an accident. There seems to be no dispute that the appropriate standpoint from which to consider whether an injury is accidental is the standpoint of the insured. First, a brief review of the history of the occurrence requirement in liability policies shows that the historical focus has been on whether an accident took place from the standpoint of the insured. Second, the Wisconsin Supreme Court clarified this issue in Schinner, and the cases since Schinner have not suggested otherwise.
However, what constitutes an accident is now much less clear in light of the recent Wisconsin Supreme Court decisions. What is clear is that there are two potential approaches to what constitutes an accident: the cause approach and the damage approach. Schinner is clear in taking the cause approach. Wilson Mutual seems to take the damage approach, although, as Justice Abrahamson points out in her dissent, the opinion is ambiguous. However, Preisler (again, decided the same day as Wilson Mutual) seems to take the cause approach. Finally, Wisconsin Pharmacal appears to take the damage approach.
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Ultimately, Justice Bradley’s question in her concurrence in Preisler remains largely unanswered, and what constitutes an accident to satisfy the occurrence requirement to trigger insurance coverage remains unsettled.
Mollie Kugler is an associate in the Milwaukee, Wisconsin office of Hinshaw & Culbertson LLP. She focuses her practice on insurance services, with an emphasis on insurance coverage issues. She also litigates many types of insurance defense cases. She received her J.D. from Fordham University School of Law in New York City in 2011, and her B.A. from Georgetown University in Washington, D.C., in 2008.
References1 The Wisconsin Supreme Court outlined the history of the
definition of occurrence in standard liability policies since 1966 in Schinner v. Gundrum. See 2013 WI 71, ¶¶ 41-43, 349 Wis. 2d 529, 833 N.W.2d 685 (citing 3 Martha A. Kersey, New Appleman on Insurance Law Library Edition, § 18.02[6][a] (Jeffrey E. Thomas & Francis J. Mootz, III, eds., 2012)).
2 See id.3 See id.4 See id.5 A brief review of the history of the definition of occurrence
also shows a long-standing connection between the occurrence requirement and the intentional acts exclusion. Today, insurers often argue both that there is no coverage under a policy’s insuring agreement because there was no occurrence and that there is no coverage under a policy because the intentional acts exclusion applies to preclude coverage.
6 2013 WI 71, 349 Wis. 2d 529, 833 N.W.2d 685.7 Id., ¶ 2.8 Id., ¶ 3.9 Id., ¶ 12.10 Id., ¶ 13.11 Id., ¶ 39.12 Id., ¶¶ 51-52 (internal citations omitted).13 Id., ¶¶ 66, 69 (citing Am. Family Mut. Ins. Co. v. Am. Girl,
Inc., 2004 WI 2, ¶ 37, 268 Wis. 2d 16, 673 N.W.2d 65).14 Id., ¶ 70. 15 Id., ¶ 100. The concurrence, authored by Justice Crooks,
agreed with the dissent that the assault constituted an occurrence.
16 2014 WI 136, 360 Wis. 2d 67, 857 N.W.2d 156.17 Id., ¶ 2.
18 Id., ¶ 1.19 Id., ¶ 28.20 Id., ¶ 29. 21 Id.22 Id., ¶ 30.23 Id., ¶ 32 (citing 9 Steven Plitt, et al., Couch on Insurance,
§ 127:4 (2d ed. 2008)).24 Id., ¶¶ 32-33.25 Id., ¶ 66. How many occurrences had taken place was
significant because the policy provided $500 of coverage per occurrence. Id., ¶ 65.
26 Id., ¶¶ 73-74 (internal citations omitted).27 Id., ¶ 82.28 2014 WI 135, 360 Wis. 2d 129, 857 N.W.2d 136.29 Id., ¶ 17.30 Id., ¶ 21.31 Id., ¶ 24.32 Id.33 Id., ¶ 25.34 Id., ¶ 26 (citing Am. Girl, Inc., 268 Wis. 2d 16, ¶ 37).35 Id., ¶ 28.36 Id., ¶¶ 61, 64.37 Id., ¶¶ 70-71.38 2016 WI 14, 367 Wis. 2d 221, 876 N.W.2d 72.39 Id., ¶ 51.40 Id., ¶ 23.41 Id., ¶ 51.42 Id., ¶ 134 (Abrahamson, J., dissenting).43 Id., ¶ 51.44 Id., ¶¶ 52-55. Notably, one of the cases the court looked
to was the American Girl case, the case frequently cited in support of the cause approach to accident and occurrence.
45 Id., ¶ 55.46 Id., ¶ 56.47 Justice Abrahamson further criticized the majority’s
narrow approach to accident: “An insured’s intentional conduct that results in unintended consequences can be an ‘accident’ under an insurance policy. As Professor Pryor explains, ‘[i]f the insured intended the act that caused the injury, is this enough to take the claim outside the definition of accident? The answer is universally, and properly, no. To read the definition of accident so narrowly would exclude all but inadvertent acts, and would exclude much of the realm of negligent acts causing personal injury.’” Id., ¶ 138 (Abrahamson, J., dissenting) (quoting Ellen S. Pryor, The Economic Loss Rule and Liability Insurance, 48 Ariz. L. Rev. 905, 906, 920 (2006)). This critique seems directed at the majority’s analysis of the Evanston insurance policy, to which California law applied. However, Justice Abrahamson’s criticism is also worth considering in the context of the Netherlands policy (to which Wisconsin law applied), given that she determined there was an occurrence under the Netherlands policy, without further explanation.
48 See Preisler, 360 Wis. 2d 129, ¶ 64.
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