Down To Cases

Punitive damages award overturned when intent to injure is not found
July 14, 1999, was to have been an exciting day in the construction of Miller Park Stadium, the home of the Milwaukee Brewers major-league professional baseball team. A crane known as “Big Blue” was to lift a large piece of the stadium's retractable roof, so workers could bolt it into place. Windy conditions prevailed during the lift, which did not go as planned. The crane, operated by a subcontractor on the project, broke, resulting in the deaths of three ironworkers.

The stadium's owner had purchased an owner-controlled insurance program to provide commercial general liability insurance coverage for the construction project. The coverage was “layered,” with each insurer's coverage attaching when the underlying policy was exhausted.

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

The third settlement was entered into during trial. In it, the subcontractor, the subcontractor's parent company and an insurer agreed to an immediate payment of $12,375,000, which would be credited against any compensatory damages awarded by the jury. The agreement also capped punitive damages at $84,626,000 if it was determined that the subcontractor had coverage for them under the OCIP and $10 million if it did not. Ultimately, the jury ruled against the subcontractor and awarded the plaintiffs $5,250,000 in compensatory damages as well as $94 million in punitive damages.

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

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

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

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

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

The appeals court concluded that the trial court erred in submitting the punitive damages issue to the jury. The trial court specifically ruled, and the plaintiffs agreed, that there was no evidence that the defendants intended to harm the decedents or that the defendants knew their conduct was practically certain to result in injury. Consequently, the appeals court reversed the judgment pertaining to punitive damages. “The issue should not have been submitted to the jury because there was insufficient evidence to send a punitive damages question to the fact-finder,” the court said. Accordingly, the punitive damages award of $94 million is hereby 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 business auto policy

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

At the time of the accident, the service did not have workers compensation insurance. However, it did have a business automobile liability policy covering the pickup truck. In response to the complaint by the deceased employee's estate, the carrier filed an intervening complaint and a petition for declaration of rights. It also named the other deceased employee's estate as a third-party defendant.

The carrier argued that its policy specifically excluded coverage for employees and that the service's failure to obtain workers compensation coverage did not extend the scope of the business auto policy. Following cross-motions for summary judgment, the trial court found that the auto policy did provide coverage and that the carrier was obligated to defend and indemnify its named and additional insureds under the policy. The insurance company appealed.

The appellate court said the central issue in the case was undisputed: Did the business auto policy exclude coverage for employees? The court then examined sections of the policy, which stated in relevant parts: “This insurance does not apply to any of the following:

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

Clearly, said the appellate court, the business auto policy excluded workers compensation coverage for any of the gardening and landscaping service's employees. The estates of the two deceased employees argued that the exclusion did not apply, however, because the service failed to obtain workers compensation coverage. They also claimed that the service was not immune from civil liability under the state workers compensation act. But the court said the service's failure to obtain workers compensation coverage and its potential liability to employees in a civil action did not enlarge the scope of coverage under the business auto policy.

The question of coverage under the policy was based on the policy's definition of the term “employee.” Although the policy did not specifically define who is an employee, it said that an “'employee' includes a 'leased worker.' 'Employee' does not include a 'temporary worker.'” The policy defined a leased worker as “a person leased to you by a labor leasing firm under an agreement between you and the labor leasing firm, to perform duties related to the conduct of your business.” It defined a temporary worker as “a person who is furnished to you for a finite time period to support or supplement your workforce in special work situations such as 'employee' absences, temporary skill shortages and seasonal workloads.”

The plaintiffs argued that the deceased workers should be covered as “temporary workers,” noting that the BAP's definition of that term included seasonal workers. They said the gardening and landscaping service employed the two deceased employees only for the summer months, when its business peaked. For its part, the carrier argued that the term included only temporary workers who were “furnished to” the employer, implying that the employer has contracted with some outside entity to “furnish” the employees. The carrier said its interpretation of the term “temporary worker” was consistent with the definition used in the state's workers compensation act. (The parties agreed that the gardening and landscaping service hired the deceased employees directly, without using any outside placement service.)

After discussing a couple of related cases adjudicated in other states, the appellate court ruled that the deceased employees were not “temporary workers” within the meaning of the business auto policy. “The clear purpose of the policy was to indemnify (the service) and its employees for liability to third parties arising out of the use of (the service's) truck, not to indemnify its employees for injuries to employees.”

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

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 address is drenau@thepoint.net.