Attorney Jahn wins a jury verdict for Wisconsin insurer

Attorney Hannah Jahn successfully tried a subrogation case before a Lafayette County, Wisconsin jury in September. Ms. Jahn’s client, a Wisconsin insurer, insured the owner of a rental house. The tenant negligently caused a kitchen fire while cooking. The damages were so severe that the house needed to be razed. The tenant’s rental insurer disputed causation and damages. After a two-day trial, including expert testimony, the jury awarded Weiss Law Office’s client a verdict of $73,916.74 plus costs, or about 95% of the damages claimed.

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Attorney Kramer wins appeal in a partition action.

Attorney Charles Kramer of Weiss Law Office, S.C., was winning counsel of record in Kresovic v. Kresovic, Case No. 2015AP002159. Kresovic involved two family members who could not agree on how to use a jointly owned 47-acre parcel in Franklin, Wisconsin. Weiss Law Office, S.C.’s client wanted the property sold as a whole while the other party wanted the property split between them. The Trial Court concluded that the property should be sold as a whole at sheriff’s sale.
On appeal, Attorney Kramer argued that the Trial Court had not erroneously exercised its discretion in ordering the property sold. He argued that the facts in this particular case warranted overcoming the preference that the property be divided. In order for the parties to achieve the highest and best usage of the property, development, they would have to cooperate. Given the record in the case, cooperation between the parties was a practical impossibility. Without cooperation, the property would remain what it was: a 47-acre parcel rented out to a farmer for far less than it was worth as developable property. The Court of Appeals agreed that the Trial Court had properly exercised its discretion in ordering the sale of the property as a whole. Accordingly, it affirmed.
The opinion may be found at:
https://www.wicourts.gov/ca/opinion/DisplayDocument.pdf?content=pdf&seqNo=173770

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Attorney Weiss appointed to the Wisconsin Defense Counsel’s Board of Directors

On August 5, 2016, Attorney Weiss was elected to the Board of Directors (Southeast Division) for the Wisconsin Defense Counsel.  The Southeast Division serves the first, sixth, thirteenth and fifteenth state bar districts.

The Wisconsin Defense Counsel “is a statewide organization of 450 attorneys dedicated to the defense of Wisconsin citizens and businesses, the maintenance of an equitable civil justice system, and the education of its members.”  For more information about the Wisconsin Defense Counsel, please visit the website.

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Attorney Weiss recently spoke at the Wisconsin Association of Justice’s Summer Seminar

Attorney Weiss recently spoke at the Wisconsin Association of Justice’s Summer Seminar.   Attorney Weiss was asked to speak on the Wisconsin Attorney Disciplinary System.   The Wisconsin Attorney Disciplinary System regulates the conduct of Wisconsin Attorneys.  Attorney Weiss is well suited to provide this overview.  He has been a member of the Office of Lawyer Regulation’s District II Committee for over 7 years.  This Committee investigates grievances concerning the conduct of Wisconsin attorneys.  He has conducted a number of investigations into the grievances filed against attorneys practicing in the State of Wisconsin.  In addition, Attorney Weiss regularly defends Wisconsin attorneys against whom grievances have been lodged with and/or complaints filed by the Office of Lawyer Regulation.  He also routinely defends attorneys who have been sued as a result of alleged legal malpractice.

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Attorney Weiss to speak at the Wisconsin Defense Counsel’s Spring Conference

Attorney Weiss was recently asked to speak at the Wisconsin Defense Counsel’s Spring Conference in Kohler, Wisconsin on April 21,2016.  He will be presenting an update on the changes in Wisconsin’s insurance subrogation law.  Here is a link for more information on the seminar.

According to its website, the Wisconsin Defense Counsel “is a statewide organization of 450 attorneys dedicated to the defense of Wisconsin citizens and businesses, the maintenance of an equitable civil justice system, and the education of its members.”  For more information about this organization, please follow this link.

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Weiss Law Office, S.C. adds Senior Trial Counsel

Weiss Law Office, S.C. is excited to announce the addition of Jane M. Cuthbert to its staff.   Ms. Cuthbert’s primary practice area is civil litigation.  The majority of her practice involves the defense of personal injury, property damage, and products liability cases for insurance and self-insured companies.   Ms. Cuthbert also handles personal injury cases on a select basis.  Her specialty lies in the litigation process, including handling all matters related to discovery, motion practice and trials.   Ms. Cuthbert has tried several cases to successful conclusion for her clients, including defense verdicts.  Ms. Cuthbert also secured an excess verdict on behalf of one of her personal injury clients.

Prior to joining Weiss Law Office, S.C., Ms. Cuthbert spent almost 6 years as a Senior Trial Attorney with one of the country’s largest insurers of vehicles, homes and small businesses.    As part of her tenure with that company, she tried several lawsuits with outstanding results for the company and her insured clients.   Her practice included handling the company’s more complex and higher exposure claims.   In addition to her successful law practice, Ms. Cuthbert was recognized by her former insurance employer as having demonstrated leadership qualities, leading her to be invited to participate in the intensive Presidential Leadership Program at the Reagan Library in Simi Valley, California.

To learn more about Attorney Cuthbert, please follow this link.

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Weiss Law Office, S.C.’s Client Prevails In Another Coverage Dispute

Rural Mutual Insurance Company v. Secura Insurance, A Mutual Co., 2015AP1864-FT (slip op. Feb. 3, 2016)

Rural Mutual resolved question over whether an insurer can enforce a condition subsequent in a policy which neither increased the risk to the insurer nor contributed to the loss.  The Wisconsin Court of Appeals, consistent with Wis. Stat. §631.11(3), held that Secura could not enforce its promissory warranty, when the alleged breach of that warranty did not increase the risk or contribute to the loss.

Rural Mutual arose out of the structural failure of a barn during a storm.  The barn belonged to Rural’s insured, Dandy Veal.  The barn was being built by Forest Construction. Secura Insurance issued a builder’s risk policy to Forest Construction, LLC that included the Dandy Veal barn.   The failure of the barn occurred during a pause in construction.  During the pause, Dandy Veal stored some cows in the barn, using less than 18% of its capacity.  No cows were injured in the barn’s structural failure.

After the barn’s failure, Secura learned that Dandy Veal had stored cows in the barn.  It denied coverage using a provision in its policy which denied coverage when the barn was occupied in whole or in part.  Rural Mutual then paid under its policy and brought its subrogation / indemnification action.

In the Trial Court, Secura relied on its coverage provision.  Rural Mutual argued that the provision was a promissory warranty since it required the existence of a condition, non-occupancy, after the inception of the policy.  Rural Mutual argued that, as a promissory warranty, it was unenforceable under Wis. Stat. §631.11(3) since the presence of the cows in the barn neither increased the risk nor contributed to the loss.

The Court of Appeals agreed with Rural Mutual’s position.  It concluded that Secura’s provision met the definition of a promissory warranty.  It also concluded that the presence of the cows neither increased the risk nor contributed to the loss.  Accordingly, it reversed the trial court.

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Gabe’s Construction Co Inc v. Holly Pipe Corporation: A pause in the march of subrogation law

Gabe’s Constr. Co. v. Holly Pipe Corp., 2015 U.S. Dist. LEXIS 28472 (E.D. Wis. Mar. 9, 2015) is a recent case which illustrates tensions in the development of Wisconsin subrogation law in with regard to the ability of an insured to use hold harmless agreements to potentially wipe out an insurer’s subrogation interest..

Gabe’s Construction Co. is in the business of installing utilities underground.  It rented drill pipe from Holly Pipe Corporation for a project in Florida.  During the project, some drill pipe broke.  Gabe’s alleged that the pipe belonged to Holly Pipe Corporation.  Gabe’s turned to its insurer, National Fire Insurance Co. of Hartford, to reimburse it for the damages it experienced due to the failure.  National Fire paid out $692,928.00.  Gabe’s alleged that it had an additional $714,383.00 in uninsured losses.  Holly Pipe’s insurer had a $1,000,000.00 policy limit.

Gabe’s sued Holly Pipe in the United States District Court for the Eastern District of Wisconsin and included its insurer, National Fire, as an involuntary plaintiff.  During the course of the suit, Gabe’s settled with Holly Pipe and its insured for $250,000.00.  The settlement agreement included a hold harmless agreement.  But for the hold harmless provision, there would have been $750,000.00 left on Holly Pipe’s policy limits to potentially compensate National Fire for its $692,928.00 claim.

After the settlement agreement, Gabe’s moved to dismiss National Fire’s subrogation claim based on the hold harmless and Rimes v. State Farm Mut. Auto. Ins. Co., 106 Wis. 2d 263, 272, 316 N.W.2d 348, 353 (1982).  The district court, the Hon. Lynn Adelman, presiding, ruled on the motion.  Judge Adelman applied Schulte v. Frazin, 176 Wis. 2d 622, 500 N.W.2d 305 (1993) and held that the hold harmless agreement was enough to create a limited pool of funds.  He then ruled that the made whole determination was a question of fact and scheduled the case for a Rimes hearing.  On the day of the hearing, the case settled.

Gabe’s represents a pause in the evolution of Wisconsin subrogation law.  In 2008 a majority of the Wisconsin Supreme Court signaled that it may be ready to pull back from permitting plaintiffs to extinguish subrogated claims by entering into indemnification agreements:

“To date this court has set no conditions on an insured’s agreement to a settlement that effectively extinguishes the rights of the subrogee insurer. This means that to date we have not explicitly addressed a situation where an insured has voluntarily signed an indemnification agreement with the tortfeasor without being made whole, even though there were ample funds available to satisfy the claim. This contingency is disturbing because it could permit the tortfeasor to escape full liability while it extinguished the contractual rights of the subrogee without the subrogee’s consent, or, possibly, even the subrogee’s knowledge.” Muller v. Soc’y Ins., 2008 WI 50, ¶75, 309 Wis. 2d 410, 750 N.W.2d 1.

The Muller Court also considered the role psychology played in settlement.  It. pointed out “Psychology does play a part in settlement negotiations.  A party cannot go into settlement negotiations waving a white flag and expect to emerge a victor.”  Id. at ¶82.

In Gabe’s Construction, there were certainly enough funds to satisfy Gabe’s claims.  The million dollar policy would have more than covered Gabe’s $714,000.00 in claimed losses, even had there been no contest as to their legitimacy.  After the settlement there were more than enough funds to satisfy National Fire’s claimed losses at 100%.

And as Muller points out, Gabe’s Construction had no incentive to settle its claims for anything more than $714,000.00.  It had no claim beyond that.  Because of Rimes, it lost nothing to include the hold harmless in the settlement agreement.  It was easy for it to enter the negotiations waiving at least a small white flag.  Holly Pipe’s insurer certainly had every incentive to settle with Gabe’s construction for a sum less than $714,000.00.  At any settlement figure less than that, Gabe’s Construction would not be me made whole and a hold harmless would wipe out National Fire’s subrogation claim.  So the plaintiff and the defendant insurer settled a contested claim for less than claim’s whole value and postured the case to wipe out the subrogation interest.

Of course, Judge Adelman was bound to respect prior Wisconsin precedent.  see Erie R.R. v. Tompkins, 304 U.S. 64 (1938).  As a federal district court judge, he was poorly positioned to accept the Muller court’s invitation to explore whether hold harmless agreements should be permitted to extinguish subrogation claims.  The resolution of this issue will have to await further review by the Wisconsin Supreme Court.  In that respect, Gabe’s Construction was a pause in the development of Wisconsin subrogation law, which will hopefully continue to move in the direction that Muller indicated.

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A Successful Defense of a Permanent Total Disability WC Claim

Weiss Law Office, S.C. (“WLO”) was recently victorious in a Labor and Industry Review Commission’s (“LIRC”) review of a Worker’s Compensation case.  Following a four-day hearing, involving two separate dates of injury and two different injuries: a lumbar and a cervical injury –  both of which required surgery, the Administrative Law Judge concluded that the employee was permanently and totally disabled as the result of her cervical work injury – the injury claim that attorneys from WLO were defending.  WLO’s client faced more than $1 million in exposure.  After briefing by Charles Kramer and Monte Weiss, LIRC concluded that the employee only suffered a temporary strain / sprain injury and had fully recovered from that work injury.  The entire award against WLO’s client was reversed.

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Effect of the Collateral Source Rule on Subrogation

How does the Collateral Source Rule interact with Subrogation?

For subrogated parties, a lawsuit or claim isn’t resolved as soon as the injured Plaintiff and the Defendant, usually another insurance company, reach a settlement.

Auto and health insurers with medical payments subrogation liens (*those subject to the Made Whole Doctrine and other equitable doctrines) still have to negotiate repayment of their liens within the context of the Plaintiff’s settlement award. (Typically, Plaintiffs provide releases to Defendants agreeing to resolve all subrogation liens, and hold the Defendant harmless from subrogation claims.)

The Collateral Source Rule legally defines the measure of a Plaintiff’s medical expense damages as the amounts billed for treatment, not the amounts actually paid for treatment. Because of the prevalence of negotiated discounts between healthcare providers and insurers, this causes apparently inconsistent results. For example, if a hospital billed a patient’s insurer $200,000.00, but the insurer negotiated a discount of $100,000.00, the legal measure of damages is the $200,000.00 billed. The subrogated carrier has the right to collect only the $100,000.00 it actually paid. See Koffman v. Leichtfuss, 2001 WI 111, ¶ 28, 246 Wis. 2d 31, 630 N.W.2d 201,

The courts have continually upheld this seemingly illogical result under the principle that if there is any “windfall” as a consequence of the insurer’s discounts, the person to benefit should be “the person who has been injured, not the one whose wrongful acts caused the injury.” Koffman v. Leichtfuss, id. at ¶ 27, citing Campbell v. Sutliff, 193 Wis. 370, 374, 214 N.W. 374 (1927). The tortfeasor is not relieved of “his obligation to the victim simply because the victim had the foresight to arrange, or good fortune to receive, benefits from a collateral source for injuries or expenses.” Ellsworth v. Schelbrock, 2000 WI 63, ¶ 7, 235 Wis. 2d 678, 611 N.W.2d 764.

The Collateral Source Rule may reduce or eliminate the right of subrogation when the Made Whole Doctrine also applies.

Simply put, the Made Whole Doctrine requires that the injured party be completely compensated for their damages before subrogated parties are reimbursed. It states, “if the damages, as properly found by the trial to the court, exceeded those received in the settlement, the insured was not made whole.” Rimes v. State Farm Mutual Auto. Ins. Co., 106 Wis. 2d 263, 279, 316 N.W.2d 348 (1981). Caselaw in Wisconsin allows the following to be true simultaneously: (1) the injured person was not made whole, (2) the injured person receives a cash settlement for well more than was paid out-of-pocket or by her insurer, and (3) the subrogated carrier has no right of recovery. The calculation never is “is there enough money in the settlement to re-pay the actual costs and liens?”

This result does seem unjust or illogical, given the purpose behind what is known as “the equitable rule of subrogation” — to “ensure that the loss is ultimately placed on the tortfeasor and prevents the subrogor (the injured party) from being unjustly enriched through double recovery.” Fischer v. Steffen, 2011 WI 34, ¶ 31, 333 Wis. 2d 503, 797 N.W.2d 501. The only way to achieve a different result may be for the legislature and the courts to re-define medical expense “damages” to be the actual out-of-pocket payments made.

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