United States District Court, E.D. Wisconsin
STADTMUELLER U.S. DISTRICT JUDGE.
had a policy of homeowners’ insurance with Defendant.
Two trees fell on Plaintiff’s house in the summer of
2018, rendering the home uninhabitable. Plaintiff made claims
on his policy for each instance of damage, but he asserts
that Defendant wrongfully delayed its investigation and, as
of the time of the filing of the complaint, had refused to
pay the claims.
Plaintiff’s complaint is not the picture of clarity. He
does not plead separate causes of action delineating
precisely which wrongs he believes Defendant has committed.
The only guidance Plaintiff gives on this matter is in his
prayer for relief, wherein he requests “all attendant
coverages not paid to date,” “consequential
damages,” interest, and “extra-contractual
damages including punitive damages and attorney
fees[.]” (Docket #1-1 at 9). Though not part of the
pleadings, the parties’ Rule 26(f) report suggests that
Plaintiff proceeds on claims for breach of contract and bad
faith denial of insurance benefits. (Docket #8 at 2).
17, 2019, Defendant filed a motion for a protective order,
seeking to avoid responses to Plaintiff’s discovery
requests relating to his bad faith claim. (Docket #28). In
support, Defendant notes that it had paid Plaintiff various
amounts prior to the filing of this action. Id. at
1–2. After filing, Plaintiff’s counsel provided
Defendant a figure comprising Plaintiff’s
“undisputed losses in the case.” (Docket #31-3 at
1). Soon afterward, Defendant paid that amount. Defendant
contends that this payment fully resolved Plaintiff’s
breach of contract claim, thereby precluding discovery on the
bad faith claim.
prove a bad faith claim in Wisconsin, “‘a
plaintiff must show the absence of a reasonable basis for
denying benefits of the policy and the defendant’s
knowledge or reckless disregard of the lack of a reasonable
basis for denying the claim.’” Brethorst v.
Allstate Prop. & Cas Ins. Co., 798 N.W.2d 467, 483
(Wis. 2011) (quoting Anderson v. Cont’l Ins.
Co., 271 N.W.2d 368, 376 (Wis. 1978)). Discovery on a
bad faith claim is allowed to delve into matters usually
protected by privilege, such as work product and
attorney-client communications. Brethorst, 798
N.W.2d at 483. To protect insurance companies from this
invasion of privacy, Wisconsin courts have limited access to
discovery on bad faith claims. They require that plaintiffs
proceeding on bad faith claims plead a breach of the
underlying insurance agreement. Id. at 483–84.
This makes sense because a breach of the agreement is a
prerequisite to a bad faith claim. Id. at 482.
[T]he insured may not proceed with discovery on a first-party
bad faith claim until it has pleaded a breach of contract by
the insurer as part of a separate bad faith claim and
satisfied the court that the insured has established such a
breach or will be able to prove such a breach in the future.
Stated differently, an insured must plead, in part, that she
was entitled to payment under the insurance contract and
allege facts to show that her claim under the contract was
not fairly debatable. To go forward in discovery, these
allegations must withstand the insurer’s rebuttal.
Id. at 483. In other words, “[t]he court must
be satisfied that the claimed breach of contract is well
founded and can be proved in the future.” Id.
argues that by paying Plaintiff his full and
“undisputed” losses in this case, he can no
longer establish a wrongful denial of benefits. This, in
turn, precludes Plaintiff from issuing discovery requests
seeking evidence on his bad faith claim. Defendant’s
argument is, in essence, one for dispositive relief,
suggesting that its payment renders summary judgment
appropriate on Plaintiff’s breach of contract claim,
and without that claim, the bad faith claim falls away. At
the very least, it seems that maintaining a bad faith claim
through summary judgment and trial would be exceedingly
difficult without any discovery from Defendant on the claim.
quite an assertion to make in a motion ostensibly seeking a
protective order. Disappointingly, Plaintiff’s response
to Defendant’s position is largely unhelpful. First,
Plaintiff asserts that this Court must apply Wisconsin
contract and tort law to this action. Why he presents this
argument is inexplicable; the matter is not disputed.
Plaintiff states that he has alleged that Defendant did
indeed breach the parties’ insurance agreement by
delaying payment of his claim by at least four months. While
he has pleaded this theory, Plaintiff has not provided any
legal support for the proposition that a delay in payment of
a claim constitutes a breach of the insurance agreement, as
distinct from the issue of bad faith.
matter is addressed, at least tangentially, by
Brethorst, which suggests that mere delay cannot
form the basis of a breach. This was to the chagrin of the
Brethorst concurrence, which would have considered a
breach of the implied duty of good faith and fair dealing in
insurance agreements as a sufficient foundation for a bad
faith claim. Brethorst, 798 N.W.2d at 486– 88
(Bradley, J., concurring). Whatever this Court’s views
on the matter, it is constrained to follow the majority
primary citation, Danner v. Auto-Owners Ins., 629
N.W.2d 159 (Wis. 2001), is not to the contrary.
Danner stands for the unremarkable proposition that
breach of the implied duty of good faith is a tort separate
and apart from a breach of the contract. Id. at
168–73. Brethorst addressed the
“question that this court avoided in Danner,
namely, whether an insured’s first-party claim of bad
faith may exist in the absence of coverage or in the absence
of some other breach of contract by the insurer.”
Brethorst, 798 N.W.2d at 478.
remainder of Plaintiff’s brief discusses the irrelevant
matter of various theories by which he might prove
Defendant’s bad faith. The only material question,
however, is whether he can still prove Defendant’s
breach. Brethorst, 798 N.W.2d at 484.
Without persuasive argument from Plaintiff on that point, the
Court must conclude that he cannot. The Court will,
therefore, grant Defendant’s motion for a protective
IT IS ORDERED that Defendant’s motion
for a protective order (Docket #28) be ...