Punitive damages award overturned when intent to injureis not found
July 14, 1999, was to have been an exciting day in the constructionof Miller Park Stadium, the home of the Milwaukee Brewersmajor-league professional baseball team. A crane known as “BigBlue” was to lift a large piece of the stadium's retractable roof,so workers could bolt it into place. Windy conditions prevailedduring the lift, which did not go as planned. The crane, operatedby a subcontractor on the project, broke, resulting in the deathsof three ironworkers.

The stadium's owner had purchased an owner-controlled insuranceprogram to provide commercial general liability insurance coveragefor the construction project. The coverage was “layered,” with eachinsurer's coverage attaching when the underlying policy wasexhausted.

After the estates of the three dead ironworkers sued thestadium's general contractor and the subcontractor, among others,the parties entered into three settlement agreements. Under two ofthem, which were entered into before trial, the first two insurersin the OCIP paid their policy limits ($2 million and $5 million) tothe plaintiffs.

The third settlement was entered into during trial. In it, thesubcontractor, the subcontractor's parent company and an insureragreed to an immediate payment of $12,375,000, which would becredited against any compensatory damages awarded by the jury. Theagreement also capped punitive damages at $84,626,000 if it wasdetermined that the subcontractor had coverage for them under theOCIP and $10 million if it did not. Ultimately, the jury ruledagainst the subcontractor and awarded the plaintiffs $5,250,000 incompensatory damages as well as $94 million in punitivedamages.

The defendants appealed the punitive damage award, arguing thatit was excessive and not warranted by the evidence. They contendedthat there was no evidence of intent to injure the workers orknowledge that such injury was “practically certain to occur.”

In its ruling in the case, the appeals court cited Wisconsin'spunitive damages law [? 895.85(3)]: “The plain language of thestatute sets forth two standards under which punitive damages maybe appropriate. The first category indicates punitive damages maybe appropriate if the conduct is malicious. The second categoryallows a punitive damage award when there is an intentionaldisregard of the rights of the plaintiff.”

All parties conceded the subcontractor did not act maliciously.“The dispute then specifically entails the interpretation of thephrase (in the state law) 'intentional disregard of the rights ofthe plaintiff,'” the court said. “The plaintiffs argue that thisstandard simply requires evidence demonstrating that (thesubcontractor) acted volitionally to do something that resulted inthe rights of the decedents to a safe work environment beingdisregarded, and that this part of the statute does not requirethat any of (the subcontractor's) employees either intended thatharm result or have either subjective or objective knowledge thatsuch harm was practically certain to occur. They contend that (thesubcontractor's site manager's) decision to proceed with the lifton such a windy day under hazardous conditions demonstrated hisdisregard for the rights of the plaintiffs, thus satisfying thestatutory standard and justifying the jury's punitive damageaward.”

The appeals court, however, said that intent requires “both anintent to do an act and an intent to cause injury by that act. Anintent to cause injury exists where the actor actually means tocause injury by his or her conduct or where injury is almostcertain to occur from the actor's conduct. If the conduct of(defendant) merely created a risk of some harm to someone, whichmay or may not have resulted, then (defendant)'s conduct wasnegligent as opposed to intentional.”

Wisconsin's punitive damages statute, the appeals courtobserved, “requires both a general intent to perform an act and aspecific intent to cause injury by that act or knowledge that theact is practically certain to result in injury, and not, as theplaintiffs would have it, a volitional act that results inunintended and unforeseen injuries.”

The appeals court concluded that the trial court erred insubmitting the punitive damages issue to the jury. The trial courtspecifically ruled, and the plaintiffs agreed, that there was noevidence that the defendants intended to harm the decedents or thatthe defendants knew their conduct was practically certain to resultin injury. Consequently, the appeals court reversed the judgmentpertaining to punitive damages. “The issue should not have beensubmitted to the jury because there was insufficient evidence tosend a punitive damages question to the fact-finder,” the courtsaid. Accordingly, the punitive damages award of $94 million ishereby vacated.” Wischer vs. Mitsubishi Heavy Industries America,Inc., No. 01-0724 (Wis. App. 09/30/2003) 2003.WI.0000916(www.versuslaw.com).

Deaths of temporary employees not covered by businessauto policy

On June 19, 2001, an employee for a gardening and landscapingservice was driving a pickup truck owned by his employer. As thetruck crossed a railroad track, a train struck it. Two otheremployees who were riding in the truck were killed in the crash.Subsequently, the estate and family of one of the deceasedemployees filed a wrongful-death action against the gardening andlandscaping service, one of its principals, the driver of thepickup truck, the railroad and the owner of the railroad crossingwhere the accident occurred.

At the time of the accident, the service did not have workerscompensation insurance. However, it did have a business automobileliability policy covering the pickup truck. In response to thecomplaint by the deceased employee's estate, the carrier filed anintervening complaint and a petition for declaration of rights. Italso named the other deceased employee's estate as a third-partydefendant.

The carrier argued that its policy specifically excludedcoverage for employees and that the service's failure to obtainworkers compensation coverage did not extend the scope of thebusiness auto policy. Following cross-motions for summary judgment,the trial court found that the auto policy did provide coverage andthat the carrier was obligated to defend and indemnify its namedand additional insureds under the policy. The insurance companyappealed.

The appellate court said the central issue in the case wasundisputed: Did the business auto policy exclude coverage foremployees? The court then examined sections of the policy, whichstated in relevant parts: “This insurance does not apply to any ofthe following:

“3. Workers' Compensation: Any obligation for which the'insured' or the 'insured's' insurer may be held liable under anyworkers' compensation, disability benefits, or unemploymentcompensation law or any similar law.
“4. Employee Indemnification and Employer's Liability 'bodilyinjury' to: a. An 'employee' of the 'insured' arising out of and inthe course of: (1) Employment by the 'insured'; or (2) Performingthe duties related to the conduct of the 'insured's'business.
“5. Fellow Employee: 'Bodily injury' to any fellow 'employee' ofthe 'insured' arising out of and in the course of the fellow'employee's' employment or while performing duties related to theconduct of your business.”

Clearly, said the appellate court, the business auto policyexcluded workers compensation coverage for any of the gardening andlandscaping service's employees. The estates of the two deceasedemployees argued that the exclusion did not apply, however, becausethe service failed to obtain workers compensation coverage. Theyalso claimed that the service was not immune from civil liabilityunder the state workers compensation act. But the court said theservice's failure to obtain workers compensation coverage and itspotential liability to employees in a civil action did not enlargethe scope of coverage under the business auto policy.

The question of coverage under the policy was based on thepolicy's definition of the term “employee.” Although the policy didnot specifically define who is an employee, it said that an“'employee' includes a 'leased worker.' 'Employee' does not includea 'temporary worker.'” The policy defined a leased worker as “aperson leased to you by a labor leasing firm under an agreementbetween you and the labor leasing firm, to perform duties relatedto the conduct of your business.” It defined a temporary worker as“a person who is furnished to you for a finite time period tosupport or supplement your workforce in special work situationssuch as 'employee' absences, temporary skill shortages and seasonalworkloads.”

The plaintiffs argued that the deceased workers should becovered as “temporary workers,” noting that the BAP's definition ofthat term included seasonal workers. They said the gardening andlandscaping service employed the two deceased employees only forthe summer months, when its business peaked. For its part, thecarrier argued that the term included only temporary workers whowere “furnished to” the employer, implying that the employer hascontracted with some outside entity to “furnish” the employees. Thecarrier said its interpretation of the term “temporary worker” wasconsistent with the definition used in the state's workerscompensation act. (The parties agreed that the gardening andlandscaping service hired the deceased employees directly, withoutusing any outside placement service.)

After discussing a couple of related cases adjudicated in otherstates, the appellate court ruled that the deceased employees werenot “temporary workers” within the meaning of the business autopolicy. “The clear purpose of the policy was to indemnify (theservice) and its employees for liability to third parties arisingout of the use of (the service's) truck, not to indemnify itsemployees for injuries to employees.”

The trial court was reversed and the appeals court held for thecarrier.

Indiana Insurance Co. vs. Brown, No. 2003-CA-000113-MR (Ky. App.12/24/2003) 2003.KY.0001768 (www.versuslaw.com).

Readers may fax Don Renau at (502) 897-1533. His e-mail addressis [email protected].