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Rural Mutual Insurance Co. v. Lester Buildings, LLC

Supreme Court of Wisconsin

June 18, 2019

Rural Mutual Insurance Company, Plaintiff-Appellant-Petitioner,
Lester Buildings, LLC and The Phoenix Insurance Company, Defendants-Third-Party Plaintiffs-Respondents, West Bend Mutual Insurance Company, Defendant-Respondent, Jim Herman, Inc., Defendant-Co-Appellant,
Van Wyks, Inc., Third-Party Defendant-Respondent.

          Submitted on Briefs: Oral Argument: March 20, 2 019

          Circuit Court: Dane county: 2016AP001837 Maryann Sumi & Valerie Bailey-Rihn Judge.

         REVIEW OF DECISION OF THE COURT OF APPEALS Reported at 382 Wis.2d 269, 915 N.W.2d 729 (2018 - unpublished)

          For the plaintiff-appellant-petitioner, there were briefs filed by Monte E. Weiss, Charles W. Kramer, and Weiss Law Offices S.C., Mequon. There was oral argument by Monte E. Weiss.

          For the defendant-third-party-plaintiff-respondent, there was a brief filed by Kevin A. Christensen, Patricia A. Stone, and Wilson Elser Moskowitz Edelman & Dicker, . LLP, Milwaukee. There was oral argument by Kevin A. Christensen.

          For the third-party-defendant-respondent, there was a brief filed by Eugene M. LaFlamme, Esq., Michael A. Snider, Esq., and McCoy Leavitt Laskey LLC, Waukesha. There was oral argument by Eugene M. LaFlamme.

          For the defendant-respondent, there was a brief filed by Jeffrey Leavell, Danielle N. Rousset, and Jeffrey Leavell, S.C., Racine. There was oral argument by Jeffrey Leavell.


         ¶1 Rural Mutual Insurance Company seeks review of an unpublished per curiam decision of the court of appeals[1] affirming the circuit court's grant of summary judgment dismissing Rural Mutual's subrogation claims.[2]The circuit court determined that Rural Mutual's claims against Lester Buildings, LLC, Phoenix Insurance Company, Van Wyks, Inc., and West Bend Mutual Insurance Company were barred pursuant to a subrogation waiver contained in a Lester Buildings' contract with Rural Mutual's insured, Jim Herman, Inc. ("Herman") . The circuit court also found that Wis.Stat. § 895.447 did not void that subrogation waiver.[3]

         ¶2 The court of appeals affirmed the circuit court and dismissed Rural Mutual's claims. However, the court of appeals declined to address whether Wis.Stat. § 895.447 voided the subrogation waiver, reasoning that the argument was insufficiently developed. We granted review as to two issues: Does § 895.447 void the subrogation waiver at issue? And was the subrogation waiver an unenforceable exculpatory contract contrary to public policy?

         ¶3 We conclude that Wis.Stat. § 895.447 does not void the subrogation waiver in Lester Buildings' contract because the waiver does not limit or eliminate tort liability. We also conclude that the subrogation waiver is not an unenforceable exculpatory contract contrary to public policy. We therefore affirm the court of appeals.


         ¶4 As the court of appeals correctly noted, "[t]he procedural history of this case is lengthy and complicated." Rural Mut. Ins. Co. v. Lester Buildings, LLC, No. 2016AP1837, unpublished slip op., ¶2 (Wis. Ct. App. Apr. 26, 2018) . In 2009, Herman entered into a contract with Lester Buildings for the design and construction of a barn on its property. The contract included the following language:

Both parties waive all rights against each other and any of their respective contractors, subcontractors and suppliers of any tier and any design professional engaged with respect to the Project, for recovery of any damages caused by casualty or other perils to the extent covered by property insurance applicable to the Work or the Project, except such rights as they have to the proceeds of such property insurance and to the extent necessary to recover amounts relating to deductibles of self-insured retentions applicable to insured losses. . . . This waiver of subrogation shall be effective notwithstanding allegations of fault, negligence, or indemnity obligation of any party seeking the benefit or production of such waiver.

         ¶5 Herman's barn required concrete in several areas, including the foundation, walls, and piers that supported the roof. The specifications for the concrete were provided by Lester Buildings, but Herman entered into a separate contract with Van Wyks in May 2010 to provide the concrete.[4] The barn that Lester Buildings and Van Wyks constructed was covered by Herman's insurance policy with Rural Mutual. In that policy, Rural Mutual explicitly allowed its insured, Herman, to waive its rights without interfering with Rural Mutual's insurance coverage: "You may waive your right of recovery in writing before a loss occurs without voiding the coverage."

         ¶6 The barn was completed in June 2010. In May 2013, one half of the barn collapsed due to strong winds, killing or causing catastrophic injuries to a large number of Herman's cattle. Rural Mutual asserts that the barn collapsed due to the improper installation of steel rebar cages in the concrete piers supporting the barn's roof. The cages were allegedly installed by Van Wyks several inches below where Lester Buildings' design had called for them to be installed, which led to the column tops cracking from the strong winds.[5] Rural Mutual paid approximately $607, 000 to rebuild Herman's barn and approximately $51, 000 for the losses related to cattle and other miscellaneous damages.

         ¶7 In 2014, Rural Mutual brought a subrogation action against Lester Buildings and its insurer, Phoenix, alleging that Lester Buildings had breached its contract with Herman and had been negligent in placing the rebar cages lower than where the specifications required. Lester Buildings and Phoenix then filed third-party cross-claims against Van Wyks and its insurer, West Bend, alleging that if Lester Buildings was liable to Rural Mutual, then Van Wyks would be responsible for any damages owed. Rural Mutual filed an amended complaint which included a count against West Bend, pursuant to Wisconsin's direct action statute, Wis.Stat. § 632.24.[6] Lester Buildings also moved to join Herman as a defendant in the case. Lester Buildings and Van Wyks, and their respective insurers (collectively the "Contractors"), filed separate motions for summary judgment against Rural Mutual. The Contractors asserted that the subrogation waiver in the Lester Buildings' contract barred Rural Mutual's claims against all of them.

         ¶8 The circuit court granted summary judgment to the Contractors on all of Rural Mutual's claims, reasoning that the subrogation waiver was enforceable and precluded Rural Mutual's claims. The circuit court determined that Gerdmann and Dykstra controlled its interpretation of Wis.Stat. § 895.447 and resolved the claims against Rural Mutual. Gerdmann v. United States Fire Ins. Co., 119 Wis.2d 367, 350 N.W.2d 730');">350 N.W.2d 730 (Ct. App. 1984); Dykstra v. Arthur G. McKee & Co., 100 Wis.2d 120, 301 N.W.2d 201');">301 N.W.2d 201 (1981) . In affirming the circuit court's decision, the court of appeals did not address Rural Mutual's argument that § 895.447 barred the subrogation waiver because it found Rural Mutual's argument regarding the specific waiver to be "woefully insufficient." Rural Mut., No. 2016AP1837, ¶20.[7]Rural Mutual filed a motion to reconsider, which was denied. Rural Mutual then petitioned this court for review.


         ¶9 We review a decision on summary judgment using the same methodology as the circuit court. Green Spring Farms v. Kersten, 136 Wis.2d 304, 314-15, 401 N.W.2d 816 (1987). Summary judgment shall be granted where the record demonstrates "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Wis.Stat. § 802.08(2). The facts related to this issue are not in dispute and therefore only questions of law remain. Statutory interpretation and the interpretation of an insurance policy present questions of law that this court reviews de novo. Mau v. North Dakota Ins. Reserve Fund, 2001 WI 134, ¶¶12, 28, 248 Wis.2d 1031, 637 N.W.2d 45.

         III. ANALYSIS

         ¶10 This case involves the validity of a subrogation waiver contained in Lester Buildings' contract with Rural Mutual's insured, Herman. The Contractors argue that Rural Mutual's subrogation claims are entirely precluded by the subrogation waiver in Lester Buildings' contract with Herman. Rural Mutual asserts that Wis.Stat. § 895.447 voids the subrogation waiver. In the alternative, Rural Mutual asserts that the subrogation waiver is an unenforceable exculpatory contract contrary to public policy.[8]

         A. Wisconsin Stat. § 895.447 does not void the subrogation waiver.

         ¶11 We first interpret Wis.Stat. § 895.447 to determine whether it voids the subrogation waiver. Statutory interpretation begins with the language of the statute and if the meaning is plain, the inquiry ordinarily ends. State ex rel. Kalal v. Circuit Court for Dane Cty., 2004 WI 58, ¶45, 271 Wis.2d 633, 681 N.W.2d 110. "A statute's purpose or scope may be readily apparent from its plain language or its relationship to surrounding or closely-related statutes-that is, from its context or the structure of the statute as a coherent whole." Id., ¶49.

         ¶12 We begin with an examination of the plain language of Wis.Stat. § 895.447, which reads:

Any provision to limit or eliminate tort liability as a part of or in connection with any contract, covenant or agreement relating to the construction, alteration, repair or maintenance of a building, structure, or other work related to construction, including any moving, ...

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