On July 11, the Wisconsin Court of Appeals addressed a couple of notable legal issues in litigation arising out of the O’Donnell Park Parking Structure panel collapse. Wosinski et al. v. Advance Cast Stone Co. et al., Nos. 2014AP1961, 2213, 2274, 2660, 2015AP1212 (Ct. App. 2017). Steven and Amy Wosinski, their son Eric, and their son’s friend, Jared Kellner, were on their way to Summerfest in June 2010 when a decorative concrete panel fell from the side of the parking structure. Jared was killed, Amy suffered severe ankle trauma that resulted in a partial leg amputation, Eric’s leg was fractured, and Steven incurred significant emotional distress from witnessing the event. The Kellner estate and the Wolinskis subsequently filed wrongful death and personal injury lawsuits against a number of parties, including Advance Cast Stone Company (“ACS”), the entity responsible for installing the decorative concrete panels when the garage was built in the late 1980’s.
ACS’s Statute of Repose Defense
Prior to trial, ACS moved for summary judgment on the ground that the accident occurred well beyond Wisconsin’s 10-year statute of repose for improvements to real property (Wis. Stat. § 893.89). The trial court denied the motion. It found that there was a material issue of fact as to whether ACS concealed or misrepresented the defective and deficient manner in which the concrete panel was installed and, therefore, fell within an exception to the repose statute for parties who commit fraud, concealment, or misrepresentation (Wis. Stat. § 893.89(4)(a)). As a result, the court allowed all of the plaintiffs’ causes of action against ACS to proceed, even those based on allegations of ACS’s negligent installation of the panel rather than the subsequent concealment and misrepresentation of those negligent installation activities.
At trial, the jury determined that ACS had used a negligent installation method that was not safe for the size of the concrete panel per the building codes in effect at the time and, therefore, was liable for 88% of the plaintiffs’ compensatory damages. The jury also concluded that ACS’s failure to follow the building design plan by employing this suspect and defective installation method, combined with its subsequent concealment and misrepresentation of its negligent installation activities, demonstrated a “heightened state of mind” that goes beyond ordinary negligence, justifying an award of punitive damages. The trial court denied ACS’s statute-of-repose defense based on the jury’s finding that ACS had concealed and misrepresented its defective installation of the concrete panel. ACS appealed.
The Court of Appeals affirmed. Specifically, the court highlighted (1) the jury’s findings that the final As-Built drawings filed with Milwaukee County reflected a design inconsistent with the method actually employed by ACS, and (2) ACS employee testimony that the company chose not to document the construction design changes in writing, despite being contractually obligated to submit written change orders to the County for approval and to maintain accurate As-Built drawings in the public file. These facts were sufficient to prove that ACS’s conduct fell squarely within the exception to the statute of repose for parties who engage in concealment and misrepresentations, and the Court of Appeals affirmed that the exception operates to preserve all causes of action against the offending party, even those based on allegations independent of the fraud, concealment, or misrepresentations that triggered the exception.
Wosinski serves as an important warning to parties engaging in reckless or nefarious conduct that they likely will not be afforded the same time-limitation defenses as parties that, at worst, have acted negligently. Here, for example, ACS ended up with a judgment of over $10 million in damages arising from its negligent installation of the concrete panel, though liability for those claims very well may have been barred by the statute of repose had ACS not subsequently concealed and misrepresented its construction method.
ACS’s Insurance Coverage Claim Against Liberty
Concurrent with the plaintiffs’ wrongful death and personal injury claims, ACS also was engaged in a dispute with Liberty, its liability insurance carrier, regarding defense and indemnification coverage for the plaintiffs’ claims. Liberty had agreed to defend ACS under a reservation of rights, asserting its position that the negligence claims were barred by the statute of repose and that the allegations of fraud, concealment, and misrepresentation not subject to the repose statute would otherwise fall under the policies’ intentional acts exclusion.
Interestingly, Liberty did not file a pre-trial declaratory judgment motion seeking a ruling on its defense obligations or a motion to bifurcate the coverage issues from the liability issues. Liberty did, however, assert its coverage position in its pre-trial report by proposing special verdict questions to be presented to the jury regarding the fraud, concealment, and misrepresentation allegations pending against ACS. The plaintiffs and ACS both objected to Liberty’s proposed jury questions and moved to bifurcate all coverage issues from the liability trial. The trial court granted the motion to bifurcate, holding that Liberty was not permitted to participate at trial because its strategy would jeopardize ACS’s defense, particularly with regard to punitive damages.
After trial, Liberty filed a number of post-verdict motions, including a request for a declaration that it owed no duty to indemnify in light of the jury’s findings regarding ACS’s concealment and misrepresentations. The trial judge denied Liberty’s motions, finding not only that there was indemnification coverage as a matter of law for the damages arising from ACS’s negligent installation activities, but also that Liberty’s pre-trial conduct amounted to a breach of both the duty to defend and the duty of good faith and fair dealing it owed to ACS. The trial court concluded that Liberty was liable for all damages that naturally flowed from its bad-faith conduct and was therefore obligated to pay the full compensatory and punitive damages award against ACS—in excess of $39 million—despite the $10 million coverage limit on ACS’s policies with Liberty. Liberty appealed.
The Court of Appeals affirmed the trial court’s holding that coverage was triggered under the Liberty policies based on the jury’s conclusion that ACS had negligently installed of the concrete panel. However, the Court of Appeals reversed the lower court’s ruling that Liberty’s decisions not to seek bifurcation and to assert its coverage positions at trial had breached the defense obligations it owed to ACS. The Court held that the focal point of the duty of defend is whether or not the insurer has provided the insured a defense at all, and that Liberty’s decision to provide a defense under a reservation of rights was an acceptable approach under Wisconsin law. The Court went on to explain that an insurer’s duty of good faith and fair dealing is separate and distinct from its defense obligations, and that the lower court overstepped its authority in holding that Liberty’s litigation strategy had been employed in bad faith because ACS had not filed a bad-faith tort claim against Liberty. The Court vacated the order obligating Liberty to pay the full $39+ million damages amount and remanded for determination of what amount of the damages award fell within the $10 million in coverage afforded by the Liberty policies.
This holding demonstrates the imperative for a party to properly plead its claims and, if necessary, amend its causes of actions as litigation progresses. Had ACS properly placed Liberty’s litigation conduct before the court by amending its claims to add a bad-faith claim, this proceeding may have resulted in the Court of Appeals affirming the trial court decision requiring Liberty to pay all $39+ million in damages. Instead, ACS now faces the potential of having to pay a substantial portion of the verdict out of its own pocket, as well as having to invest additional time and resources into litigating Liberty’s alleged bad faith conduct in future proceedings.