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COURT OF APPEALS
DECISION
DATED AND FILED
March 2, 2011
A.
John Voelker
Acting Clerk of Court of Appeals
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NOTICE
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This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official
Reports.
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See Wis. Stat. § 808.10 and Rule 809.62.
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Appeal No.
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STATE OF WISCONSIN
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IN COURT OF
APPEALS
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DISTRICT II
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Kris Woelfel, Julie Woelfel and City View Dairy, LLC,
Plaintiffs-Respondents,
v.
Homestead Mutual Insurance Company,
Defendant-Appellant.
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APPEAL
from a judgment of the circuit court for Calumet County: Donald
A. Poppy, Judge. Affirmed.
Before
Neubauer , P.J., Anderson and Reilly, JJ.
¶1 PER CURIAM. Homestead Mutual Insurance
Company appeals from a jury’s verdict that a silo on the dairy farm operated by
Kris and Julie Woelfel and City View Dairy, LLC (collectively the Woelfels),
collapsed due to an explosion and awarding the Woelfels bad faith and punitive
damages because of Homestead’s denial of coverage for the damages caused by the
collapse. Homestead raises five issues
on appeal: whether the jury instruction
defining “explosion” was proper, whether the trial court properly exercised its
discretion in admitting into evidence burned barn boards produced just one week
before trial, whether a mistrial should have been granted due to improper
closing argument, and whether bad faith and punitive damages claims should have
been submitted to the jury. We affirm
the judgment.
¶2 About 10:30 p.m. on September 15, 2006, the silo at the
Woelfels’ City View Dairy collapsed. It
fell on the adjacent dairy barn and killed or maimed several cows. Concrete debris landed in all directions and
up to several hundred feet away. There
were no witnesses to the event.
Neighbors to the farm reported hearing a “sonic like boom,” “whoof,” or
“rolling thunder” sound that lasted several seconds followed by a “loud
crash.” The silo had been inspected and
then filled with fresh silage earlier that day.
¶3 The Woelfels were insured by Mount Calvary Mutual Insurance
Company. When the silo failed, Mount Calvary
was merging with Homestead, so Homestead took over and completed the claim
investigation. The insurance policy
provided coverage for eleven listed perils, including fire, wind storm, and
explosion; there was no coverage for collapse due to deterioration or
structural failure of the silo. The
cause of the collapse was a point of disagreement between the Woelfels and Homestead.
¶4 The day following the collapse, an independent adjuster, Bob
Berens, visited the farm on Homestead’s
behalf. He advised the Woelfels that if
the silo had simply failed, the lost cows would be covered but there would be
no coverage for the damage to the silo or barn.
Homestead
sent a structural engineer, Tim Grocholski, out to investigate at the
farm. On September 19, 2006, Grocholski
and Homestead’s
general manager, George Tipler, visited the farm. While at the farm, Grocholski advised Tipler
that the silo did not seem to have very many signs of deterioration but that
there were some areas of concern. On
September 22, 2006, Tipler returned to the farm to look for possible signs of
an explosion, particularly the distance at which debris had landed. He had the Woelfels execute a “non-waiver
agreement” that day which provided notice that there was an issue with
coverage. By September 26, 2006,
Grocholski advised Homestead
that, in his opinion, the silo had just failed and the collapse was not due to
an explosion. Tipler told the Woelfels
that the tentative finding was that the collapse was caused by failure and
would not be covered. On October 9,
2006, Homestead
contacted Bruce Johnson of Wisconsin Silos and asked him to determine the cause
of the collapse. Johnson visited the
farm the next day. Johnson’s October 16,
2006 written report concluded that twenty-five percent of the original concrete
wall of the silo had deteriorated and exposed rebar to silo acids. He opined that the collapse was the result of
failure caused by rapid filling of the silo, settling, poor maintenance, and
structural weakness. A formal denial of
coverage was made by a December 7, 2006 letter.
¶5 The Woelfels commenced this action to recover their loss and essentially
to determine coverage. The amended
complaint alleged bad faith for Homestead’s
denial of their claim without reasonable investigation and without a reasonable
basis in law or fact. At the jury trial
they presented evidence that during the clean-up of the collapsed silo burned
feed, burned debris, and burn odors were discovered. The Woelfels’ expert, Mark Beavers, had
inspected the site on October 10, 2006.
Beavers indicated that while at the site with Johnson, Homestead’s silo expert, Johnson observed a
burnt odor but did little more than a few minutes of digging amongst the
silage. Beavers concluded that a fire
started in the feed/mixing room triggering a grain dust explosion in the silo
chute causing the silo to collapse. Dr.
Alfred Szews, an electrical engineer and forensic fire and explosion
investigator, basically concurred. The
Woelfels also pointed out that initial loss notices completed by Homestead’s
representatives suggested that there had been a “barn fire” or “possible site
explosion,” but that Grocholski had not been provided that information. Grocholski acknowledged that if there had
been a report of fire or the discovery of burnt material, he would have wanted
to know that when he was investigating the cause of the collapse.
¶6 During the trial, Homestead
moved for a directed verdict on both bad faith and punitive damages. Those motions were taken under
advisement. The jury determined that an
explosion was the cause of the silo’s collapse.
It also found that Homestead
exercised bad faith in denying the claim and intentionally disregarded the
Woelfels’ rights. The jury awarded
$700,000 as punitive damages. On motions
after verdict Homestead
renewed its claim that there was no basis for a bad faith and punitive damage
verdict, it sought remittitur on damages, and asked for a new trial. Homestead’s
motions were denied.
¶7 We first address Homestead’s
claim that the jury instruction defining “explosion” erroneously stated the law
as applied to the facts of this case.
The trial court has broad discretion when instructing a jury. White v. Leeder, 149 Wis. 2d 948, 954,
440 N.W.2d 557 (1989). No grounds for
reversal exist if the overall meaning communicated by the instruction as a
whole was a correct statement of the law and the instruction comported with the
facts of the case. Id. at 954-55.
¶8 Homestead’s
insurance policy does not define the peril “explosion.” Aetna
Cas. & Sur. Co. v. Osborne McMillan Elevator Co., 26
Wis. 2d 292,
299-300, 132
N.W.2d 510
(1965),
teaches that “an explosion as applied to silage in a silo or contents of a
container must include the element of an active force independent of or in
addition to the force of weight and height of the contents which seek a sudden
and violent release by breaking the container.”
The Aetna Cas.
court explained:
In cases of confined substances if the container fails
because of structural weakness so as to let out the contents as distinguished
from the contents bursting out because of its force, there is no explosion even
though it might be said the tank ruptured or burst open. The probability of grain like water which is
not an explodable substance being an element of an explosion consists in its
ability to contain or harbor active forces or energy. In explosions involving a nonexplodable
substance there must be an internal active force created which breaks out of
its confinement. In the case of grain
such active force must be in addition to that of the normal static force exerted
on the inside of a container because of the weight and position of the grain.
Id. at 301-02.
¶9 Here the jury was instructed:
An “explosion” is a violent expansion or bursting that
is accompanied by noise and is caused by a sudden release of energy. To be an “explosion,” the event must include
an active force independent of or in addition to that of the normal static
force exerted on the inside of a container because of the weight and position
of the contents. With a non-explodable
substance, there must be an internal active force created which breaks out of
its confinement. In cases of confined
substances, if the container fails because of structural weakness so as to let
out the contents as distinguished from the contents bursting out because of its
force, there is no explosion even though it might be said the container
ruptured or burst open.
¶10 The instruction uses the same words that the Aetna Cas.
court utilized to describe an explosion in the circumstances of grain
storage. It was not a misstatement of
the law. Homestead’s requested instruction is not measurably
different. Both require the need for an active force in
addition to the force of the weight and height of the contents of the
silo. Moreover, the Woelfels’ claim was
that the explosion was precipitated by fire.
By reference to the need for an additional active force, the jury was
properly instructed to consider whether something other than the silo’s
contents caused an explosion and the silo’s collapse. There was no error in the jury instruction.
¶11 Eleven days before trial and after the time for discovery had
expired, the Woelfels gave notice that they intended to cut two charred boards
from their original location within the barn and introduce them as trial
exhibits. Homestead objected to admission of the
boards. It claimed surprise since during
his discovery deposition, Kris Woelfel indicated no knowledge of any burnt wood
or other combustible material. In admitting
the evidence, the trial court referred to Wis.
Stat. § 804.01(5)(b) (2009-10),
which requires a party to amend a prior discovery response when the party knows
the response is no longer correct. The
trial court found that the Woelfels acted in good faith in supplementing their
response by disclosing the discovery of the burnt boards after conferring with
witness Peter Ahrens, a contractor who performed clean-up and demolition at the
farm after the collapse of the silo. The trial court further indicated that it had
weighed the potential prejudice to the defense against the goal of presenting
the jury with all relevant evidence and found the balance to support
admissibility of the evidence.
¶12 Homestead
argues that the trial court erroneously exercised its discretion in admitting
the burnt boards into evidence. The
admission or exclusion of evidence is a discretionary determination that will
be upheld if it has a reasonable basis and was made in accordance with accepted
legal standards and the facts of record.
Lievrouw v. Roth, 157 Wis. 2d
332, 348, 459 N.W.2d 850 (Ct. App. 1990).
Under Wis. Stat. § 904.03,
evidence may be excluded if its probative value is substantially outweighed by
the danger of unfair prejudice “or by considerations of undue delay, waste of
time, or needless presentation of cumulative evidence.” The balancing test favors admissibility. See Lievrouw,
157 Wis. 2d
at 350. “Although [§] 904.03 does not
list ‘surprise’ as a specific ground for excluding evidence, testimony which
results in surprise may be excluded if the surprise would require a continuance
causing undue delay or if surprise is coupled with the danger of prejudice and
confusion of issues.” Lease
Am. Corp. v. Insurance Co. of N. Am., 88 Wis. 2d 395, 400, 276 N.W.2d 767 (1979).
¶13 The trial court recognized the probative value of the burnt
boards when it looked at the desirability of presenting the jury with all
relevant evidence. The trial lasted six
days and the admissibility of the burnt boards was discussed on the first day
of the trial. When the issue was decided
on day three, Homestead
did not suggest that a continuance would be necessary. Indeed the trial court accommodated Homestead’s request that
its fire/explosion expert be permitted to visit the farm and the spot where the
boards were removed before the expert’s testimony. Homestead
claims prejudice because its expert, Robert Schroeder, testified based on the
sworn testimony of Kris Woelfel and Beavers that besides small amounts of burnt
feed, there were no other burnt materials, and that testimony turned out to be
incorrect. Homestead does not provide a record citation
to any portion of Schroeder’s testimony wedded to Kris Woelfel’s and Beavers’s
observation of the extent of burnt material. We will not make an independent search of the
record to find the evidence supporting the claim of prejudice. See
Grothe
v. Valley Coatings, Inc., 2000 WI App 240, ¶6, 239 Wis. 2d 406, 620 N.W.2d 463. ‘“Unfair prejudice’ does not mean damage to a
party’s cause.... Rather, unfair
prejudice results where the proffered evidence … would have a tendency to
influence the outcome by improper means....”
State v. Mordica, 168 Wis. 2d
593, 605, 484 N.W.2d 352 (Ct. App. 1992).
There is no suggestion that the burnt boards would influence the jury by
improper means. We conclude the trial
court properly exercised its discretion admitting the burnt boards into
evidence.
¶14 During closing argument, the Woelfels’ counsel made the
following statement:
So, after you have found answers to be “yes” on the
coverage, you will then get to the question which is called the “bad faith”
part of the case. We think you will find
that. Please don’t leave the Woelfels
with nothing in this case. Your “yes”
answers to questions 1 and 2 are supported by the evidence in this case.
No contemporaneous objection
was made by the defense.
¶15 Homestead
contends that counsel’s request that the jury not leave the Woelfels with
nothing had the prohibited effect of informing the jury of the effect of its
verdict. See Kobelinski v. Milwaukee & Suburban
Transp. Corp., 56 Wis. 2d
504, 520, 202 N.W.2d 415 (1972); Pecor v. Home Indem. Co., 234 Wis. 407, 419, 291 N.W.
313 (1940). Homestead forfeited an objection to the
statement when it failed to make an objection when the statement was made. Kobelinski, 56 Wis. 2d at 521. Even considering the claim on Homestead’s postargument
motion for a mistrial,
it must “affirmatively appear” that the remarks
prejudiced the complaining party. We
must be convinced that the verdict reflects a result which in all probability
would have been more favorable to appellants but for the improper conduct. The test for showing prejudice is most
stringent when the trial court has found that the improper argument did not
have a prejudicial effect and did not grant a new trial.
Wausau
Underwriters v. Dane County, 142 Wis. 2d
315, 329-30, 417 N.W.2d 914 (Ct. App. 1987) (citations omitted).
¶16 The trial court concluded, and we agree, that the jury was well
aware that unless they found that an explosion occurred at the dairy and caused
the silo to collapse, the Woelfels would recover nothing. The whole trial was about Homestead’s denial of the claim because it
concluded that there was no explosion at the dairy. Homestead
chose not to bifurcate the trial on coverage and bad faith. The jury was informed there could only be bad
faith if coverage existed. Counsel’s
reference in closing argument to needing a “yes” answer on verdict questions
one and two only referred to what the jury already knew—if there was no
coverage there would be no recovery. Not only was counsel’s statement not
improper, we are not convinced that the jury’s verdict was influenced by it such
that Homestead
was prejudiced.
¶17 The two remaining issues on appeal are framed by Homestead as whether
there was sufficient evidence to submit the bad faith and punitive damages
claims to the jury. Where the challenge
is to the sufficiency of the evidence to go to the jury in the first place, we
must view the evidence in the light most favorable to the party against whom
the motion is made and we will not reverse the trial court’s determination
unless it is clearly wrong. Foseid
v. State Bank of Cross Plains, 197 Wis. 2d 772, 783, 541 N.W.2d 203 (Ct.
App. 1995). The clearly wrong standard
applies even when the trial court reserves a ruling on the motion for a
directed verdict during the trial and the motion is renewed after verdict. Id.
at 787-88. Homestead argues that the trial court erred
in submitting the bad faith and punitive damages claims to the jury so we apply
the clearly wrong standard of review.
¶18 A trial court may not grant a directed verdict “‘unless it
finds, as a matter of law, that no jury could disagree on the proper facts or
the inferences to be drawn therefrom,’ and that there is no credible evidence
to support a verdict for the plaintiff.”
Weiss
v. United Fire & Cas. Co., 197
Wis. 2d 365,
388,
541
N.W.2d 753
(1995)
(citation omitted). The trial court “is
better positioned to decide the weight and relevancy of the testimony.” Id. For that reason, we must give substantial
deference to the trial court’s assessment of the evidence. See
id.
at 389. If there is any credible
evidence to support a jury’s verdict, the verdict must stand and the trial
court is not clearly wrong in having submitted the claims to the jury. See id. at 389-90, 392.
¶19 With respect to the bad faith claim, Homestead
contends there can be only one interpretation of the evidence—that the cause of
the silo’s collapse was “fairly debatable” and therefore Homestead had a reasonable basis for denying
coverage. See Anderson v.
Continental Ins. Co., 85 Wis. 2d
675, 693, 271 N.W.2d 368 (1978) (defining the tort of bad faith). Homestead points to evidence that within one
week of the reported loss it had a structural engineer out to the farm and
obtained an opinion about the cause of the collapse, that upon the Woelfels’
dissatisfaction with the qualifications of that engineer it called a second expert
to the site, that it tried to acquire evidence or expert reports the Woelfels
had but that information was not provided until eleven months after the
collapse, and that Kris Woelfel acknowledged in his trial testimony that
reasonable minds could differ on the cause of the collapse. It argues that bad faith cannot be found even
if the insurer conducted a flawed investigation. See Mills v. Regent Ins. Co.,
152 Wis. 2d
566, 575-76, 449 N.W.2d 294 (Ct. App. 1989).
¶20 The jury was properly instructed that Homestead could be found to have acted in bad
faith if it conducted its investigation in such a way as to prevent it from
learning the true facts upon which the claim was based. Wis JI—Civil 2761. There was disputed testimony about whether
Berens, the first adjuster at the farm, told the Woelfels that there would be
no coverage without any investigation at all.
The jury was free to believe the Woelfels’ version that Berens had
simply indicated there would not be coverage for the collapse without even
walking into the barn. There was
evidence that Homestead’s
initial visits to the site were cursory and that it failed to talk to persons
who heard the event, first responders to the scene who smelled burnt material,
or those who dug amongst the rubble and observed burnt material. Even though Tipler returned to the farm for
the purpose of observing the debris field, he never pursued an explanation for
what he observed. He presented the
Woelfels with a “non-waiver agreement,” before getting the report from
Grocholski, the structural engineer, and that agreement signaled that there was
going to be a coverage dispute.
Grocholski had information that the silo had been inspected on the day
it was filled but simply dismissed the work of the inspector as “primarily
equipment oriented.” He also relied on
the vertical alignment of exposed rebar.
Kris Woelfel indicated that Grocholski had no response when Woelfel
pointed out that the alignment was due to the rebar being cut to facilitate
removal. Johnson, Homestead’s second expert, left the scene
after discovering some burnt material and did not address it. Further, Homestead was already in the “pre-denial”
stage before Johnson even visited the farm.
This evidence is sufficient to support the jury’s bad faith finding and,
as such, the trial court was not clearly wrong in denying the motion for a
directed verdict and submitting the bad faith claim to the jury.
¶21 A question on punitive damages should not be submitted to the
jury in the absence of evidence warranting a conclusion to a reasonable
certainty that the party against whom punitive damages may be awarded acted
with the requisite conduct. Strenke
v. Hogner, 2005 WI 25, ¶40, 279 Wis. 2d
52, 694 N.W.2d 296. The injured party
must show an intentional disregard of the rights of others on the part of the
wrongdoer. Id., ¶27; Wis. Stat. § 895.043(3).
“[A] person acts in an intentional disregard of the rights of the
plaintiff if the person acts with a purpose to disregard the plaintiff’s
rights, or is aware that his or her acts are substantially certain to result in
the plaintiff’s rights being disregarded,” and if the conduct was sufficiently
aggravated to warrant punishment by punitive damages. Strenke, 279 Wis. 2d 52, ¶38. The disregard of the right to a thorough
investigation and evaluation of a claim can result in punitive damages. Id.,
¶30. The entitlement to punitive damages
must be proven by clear and convincing evidence. Id.,
¶41. Whether the evidence, if believed
by the jury, is sufficient to submit punitive damages to the jury presents a
question of law which we review de novo.
Id.,
¶13.
¶22 Homestead
acknowledges that evidence on which punitive damages could be based was: Berens’ comments and demeanor, alleged
disregard of fire evidence, Tipler’s notes suggesting an early and persistent
view to deny the claim, and alleged manipulation of experts to confirm reasons
for denial. Although Homestead
provides a reasonable explanation to counteract that evidence, the jury was not
required to accept Homestead’s
view of the evidence. The competing
evidence allowed for the rejection of Homestead’s
view and permitted the jury to infer the nefarious intent which Homestead disavows. Ultimately we must defer to the jury’s
assessment of the credibility of witnesses and the weight to be given their
testimony, and must accept the reasonable inferences drawn by the jury. Richards v. Mendivil, 200 Wis. 2d 665, 671,
548 N.W.2d 85 (Ct. App. 1996).
¶23 There was sufficient evidence from which the jury could
conclude that Homestead
was aware that its acts were substantially certain to result in the disregard
of the Woelfels’ right to a thorough investigation and evaluation of the cause
of the silo’s collapse. The jury could
conclude that the immediacy of Homestead’s
conclusion of the cause was conduct that was sufficiently aggravated to warrant
punishment by punitive damages. It was
appropriate to submit the punitive damages question to the jury.
By the Court.—Judgment affirmed.
This
opinion will not be published. See Wis.
Stat. Rule 809.23(1)(b)5.