WISCONSIN CONSTRUCTION CLAIMS RESOURCES
1 Construction Claims
- 1.1 Limitations & Repose Periods
- 1.2 Right to Repair Laws and/or Pre-Suit Statutory Procedures
- 1.3 Indemnity and Contribution
- 1.4 Certificate of Merit – Experts
- 1.5 Economic Loss Doctrine
- 1.6 Contractor Licensing Requirement.
- 1.7 Common Law & Statutory Claims
- 2 Construction Damages
3 Trigger of Coverage
- 3.1 Definition of an Occurrence
- 3.2 Duty to Defend
- 3.3 Coverage Defenses
- 3.4 Choice of Law (Forum Selection Clauses)
- 3.5 Targeted Tenders
Limitations & Repose Periods
Statutes of Limitations
Personal Injury. Any claims for bodily injury must be commenced within three years. Wis. Stat. § 893.54
Property Damage. All claims for damages to real or personal property must be commenced within six (6) years. Wis. Stat. § 893.52.
Contract Damages. All claims based on a contract must be commenced within six (6) years. Wis. Stat. § 893.43. Accrual begins when the breach occurs, regardless of when the breach is discovered. CLL Assoc. v. Arrowhead Pacific, 171 Wis.2d 604, 609, 497 N.W.2d 115 (1993).
Wisconsin has adopted the discovery rule to toll the statute of limitations for property damages and personal injury claims until the person knows or reasonably should know of the injury and must act with reasonable diligence. Austin-White ex rel. Skow v. Young, 279 Wis. 2d 420, 424 (2005).
Statute of Repose
Wisconsin has adopted a seven (7) year statute of repose, barring actions arising out of any deficiency or defect in the design, land surveying, planning, supervision or observation of construction of, the construction of, or the furnishing of materials for, the improvement to real property that commence more than seven years after substantial completion of an improvement to real property to recover damages for property injury, personal injury, or wrongful death. Wis. Stat. § 893.89(2).
If damages are sustained beginning on the first day of the 5th year and ending the last day of the 7th year after the substantial completion of the improvement to real property, the time for commencing the action for the damages is extended from three (3) years after the date on which the damages occurred. Wis. Stat. § 893.89(3)(a)
Right to Repair Laws and/or Pre-Suit Statutory Procedures
Wisconsin law provides a right to repair construction defects in residential construction. Wis. Stat. § 895.07. A contractor must provide the required information to the consumer at the time of contracting and, if done, a claimant must provide notice to the contractor that contains a description of the claim at least 90 days before filing the claims. Wis. Stat. § 895.07. The contractor then may offer to repair the defect, settle the claim by monetary payment or a combination of repair and payment, or reject the claim. Wis. Stat. § 895.07(2). The claimant is not obligated to accept the contractor’s offer. Wis. Stat. § 895.07.
The Wisconsin Arbitration Act indicates a provision in any written contract to settle by arbitration a controversy thereafter arising out of the contract is valid, irrevocable and enforceable, expect upon such grounds as exist at law or in equity for the revocation of any contract. Wis. Stat. § 788.01.
Indemnity and Contribution
Wisconsin courts have consistently upheld the validity of indemnity contracts. Mustas v. Inland Const., Inc., 19 Wis.2d 194, 205, 120 N.W.2d 95 (1963)
Indemnity agreements are liberally construed when they address the negligence of the indemnitor, but strictly construed when the indemnitee seeks indemnification for his or her own negligence. Baker v. McDel Corp., 53 Wis.2d 71, 76, 191 N.W.2d 846 (1971). However, strict construction cannot be used to defeat the clear intent of the parties. Spivey v. Great Atlantic & Pacific Tea Co.. 79 Wis.2d 58, 63, 255 N.W.2d 469 (1977).
A court will not allow an indemnitee to be indemnified for his or her own negligent acts absent a clear and unequivocal statement to that effect in the agreement. Dykstra v. Arthur G. McKee & Co., 92 Wis. 2d 17, 32, 284 N.W.2d 692, 700 (Ct. App. 1979). Where such a statement is present, however, the provision is enforceable. Dykstra v. Arthur G. McKee & Co., 100 Wis. 2d 120, 125, 301 N.W.2d 201, 204 (1981).
- A joint tortfeasor who pays more than his share of the damages can seek contribution against the other tortfeasors. State Farm Mut. Auto. Ins. Co. v. Schara, 201 N.W.2d 758 (Wis. 1972).
- In all contribution actions, including those sounding both in contract and tort, the question is simply whether one person jointly liable paid more than his fair share for a common obligation. Kafka v. Pope, 194 Wis. 2d 234, 242, 533 N.W.2d 491, 494 (1995).
- A settlement by one tortfeasor does not alter the right to contribution. Id.
- Each party’s degree of fault is allocated by the jury. Wis. Stat. § 895.045; Pachowitz v. Milwaukee Suburban Transport Corp., 202 N.W.2d 268 (Wis. 1972).
- The right to contribution arises when one party has paid more (judgment or settlement) than its just proportion of a joint liability. General Accident Ins. Co. v. Schoendorf & Sorgi, 549 N.W.2d 429 (Wis. 1996). “[S]uccessive tortfeasors-those whose negligent acts produce discrete, albeit overlapping or otherwise related, injuries may not assert claims of contribution against one another.” Gen. Accident Ins. Co. of Am. v. Schoendorf & Sorgi, 195 Wis. 2d 784, 792, 537 N.W.2d 33, 36 (Ct. App. 1995) (citing, inter alia, Fisher v. Milwaukee Elec. Ry. & Light Co., 173 Wis. 57, 60, 180 N.W. 269 (1920)).
- The statute of limitations for an action arising out of a claim of contribution is one (1) year, and accrues from the date of payment, not the determination of proportional responsibilities. Wis. Stat. § 893.92.
Certificate of Merit – Experts
Economic Loss Doctrine
In Wisconsin, this prohibits a purchaser of a product from recovering from a manufacturer or seller on a tort theory for damages that are solely economic. Linden v. Cascade Stone Co., 2005 WI 113, ¶ 6, 283 Wis.2d 606, 699, N.W.2d 189. Wisconsin courts have broadly applied the economic loss doctrine in construction matters. Id.
Economic losses are losses that arise because a product does not perform as expected. Id. Economic losses do not include personal injury and damage to other property. Daanen & Janssen, Inc. v. Cedarapids, Inc., 216 Wis.2d 395, 402, 573, N.W.2d 842 (1998).
The economic loss doctrine applies regardless of whether the parties are in privity of contract. For example, Wisconsin courts have specifically held the economic loss doctrine barred homeowners’ tort claims against subcontractors for defective workmanship in the construction of their home. Rather, the homeowners’ recourse is with the general contractor via the applicable construction contract. Linden, 2005 WI 113, ¶ 17.
While exceptions to the economic loss doctrine exists for personal injury and damage to other property, there is an exception to the “other property” exception: the integrated systems limitation. “[O]nce a part becomes integrated into a completed product or system, the entire produce or system ceases to be ‘other property’ for purposes of the economic loss doctrine.” Selzer v. Brunsell Bros., 2002 WI App 232, ¶ 38, 257 Wis.2d 809, 652 N.W.2d 806. The integrated system limitation has been applied to instances regarding the cement in concrete pavers, the windows in a condominium building, and stucco walls in a house. See Wausau Tile Inc. v. County Concrete Corp., 226 Wis.2d 235, 249, 593 N.W.2d 445 (1999); Bay Breeze Condo Ass’n v. Norco Windows, Inc., 2002 WI App 205, 257 Wis.2d 511, 651 N.W.2d 738; Linden, 2005 WI 113, ¶ 26.
Contractor Licensing Requirement.
Under Wis. Admin. Code § CPA 305.31, no person may obtain a building permit for a one- and two-family dwelling unless the person complies with all of the following, except as provided under Wis. Stats. § 101.654(1)(b) and (1)(c)(2):
Holds a Dwelling Contractor certification or a Dwelling Contractor Restricted certification issued by the Department;
Holds or engages, as an employee, a person who holds a certification issued by the Department as a Dwelling Contractor Qualifier.
Common Law & Statutory Claims
Negligence. “A building contractor has a duty to exercise ordinary care in the construction or remodeling of a building. This duty requires such contractor to perform work with the same degree of care and skill and to provide such suitable materials as are used and provided by contractors or reasonable prudence, skill, and judgment in similar construction.” Wis. J.I. Civil 1022.4. However, if an owner knowingly accepts a defect, the owner may waive a negligence claim. Fisher v. Simon, 15 Wis.2d 207, 213, 112 N.W.2d 705 (1961).
Wisconsin’s Safe Place Statute. This statute, Wis. Stat. § 101.11(1) provides that “every employer shall furnish employment which shall be safe for the employees therein and shall furnish a place of employment which shall be safe for employees therein and for frequenters thereof…
“Safe” is statutorily defined when applied to an employment or place of employment as “such freedom from danger to the life, health, safety or welfare of employees or frequenters … as the nature of the employment, place of employment, or public building, will reasonably permit.” Wis. Stat. § 101.01(13).
- This statute has been applied to architects and builders. Potter v. Kenosha, 268 Wis. 361, 372, 68 N.W.2d 4, 10 (1955)
- The safe-place statute is not a cause of action. It is a duty of care. Krause v. Veterans of Foreign Wars Post No. 6498, 9 Wis. 2d 547, 552, 101 N.W.2d 645 (1960) Violations should be brought as allegations of negligence on the part of the defendant. Thiel v. Bahr Constr. Co., 13 Wis. 2d 196, 198, 108 N.W.2d 573 (1961).
- A violation of the safe-place statute constitutes negligence. Fandrey v. Am. Family Mut. Ins. Co., 2004 WI 62, ¶ 19, 272 Wis. 2d 46, 680 N.W.2d 345 (citing Krause v. Veterans for Foreign Wars, 9 Wis. 2d 547, 552, 101 N.W.2d 645 (1960)). To recover for a safe-place violation, the plaintiff must show that the violation was either the cause of the injury, or in the failure to act, that the action that safe-place duty was designed to prevent the injury caused by the failure. Umnus v. Wis. Pub. Serv. Corp., 260 Wis. 433, 438, 51 N.W.2d 42 (1952). Furthermore, the plaintiff must still prove all of the elements of negligence. Brueggeman v. Continental Casualty Co., 141 Wis. 2d 406, 415 N.W.2d 531 (1987).
Cost of Repair
Under Wisconsin law, the measure of damages to real property is the lesser of (1) the cost to repair, or (2) the reduction in value. Wausau Tile, Inc. v. County Concrete Corp., 226 Wis.2d 235, 248, 593 N.W.2d 445 (1999). If the cost to repair constitutes economic waste, then the measure of damages is the difference between the value of the property if it had been properly constructed and the value as constructed. W.G. Slugg Seed & Fertilizer, Inc. v. Paulsen Lumber, Inc., 62 Wis.2d 220, 226, 214 N.W.2d 413 (1974).
Diminution in Value
The Wisconsin Supreme Court has indicted that diminution in value measures the difference between the value of a building as it stands, with faulty and incomplete construction, and the value of the building if it had been constructed in accordance with the plans and specifications. Plante v. Jacobs, 10 Wis.2d 567, 572, 103 N.W.2d 296 (1960).
Punitive damages are not recoverable for a breach of contract claim alone. There must be an underlying tort claim. Hauer v. Union State Bank, 192 Wis.2d 576, 603, 532 N.W.2d 456 (Ct. App. 1995).
To recover punitive damages, a plaintiff must demonstrate the defendant acted maliciously or with an intentional disregard for the plaintiff’s rights. Wis. Stat. § 895.043. Punitive damages are only used in extraordinary cases to sanctions certain acts as a deterrent to others. Entzminger v. Ford Motor Co., 47 Wis.2d 751, 757-758, 177 N.W.2d 899 (1970).
Given the standard for punitive damages, they are rare in the construction setting. In Wischer v. Mitsubishi Heavy Industries America, Inc., the plaintiff was awarded punitive damages as a result of her husband having been killed due to a crane collapse. Wischer, 2005 WI 26, ¶ 8, 279 Wis.2d 4, 694 N.W.2d 320. There, the jury agreed the defendants intentionally disregarded the decedent’s right to a safe work environment. Id.
Attorneys fees are generally not recoverable in Wisconsin, unless called for specifically in a contract between the parties, or through statute.
Joint and Several Liability
Under Wis. Stat. § 895.045(1), a defendant is jointly and severally liable to the plaintiff where his/her negligence is 51 percent or greater. Further, the negligence of the plaintiff shall be measured separately against the negligence of each person found to be causally negligent and where the liability of that defendant does not exceed that of the plaintiff, that defendant is not liable for plaintiff’s loss. Id. The liability of each person found to be causally negligent whose percentage of total causal negligence is less than 51 percent is limited to the percentage of the total causal negligence attributed to that person. Id.
Cost Incurred to Access Repair Areas
Where not modified by the terms of the contract, the cost incurred to access repair areas is a consequential damage and recoverable under Wisconsin law. See Thorp Sales Corp. v. Gyuro Grading Co., Inc., 111 Wis.2d 431, 438-439, 331 N.W.2d 342 (1983)
Where a claim is via breach of contract, a plaintiff is entitled to the benefit of the bargain, which may include consequential damages. Thorp Sales Corp. v. Gyuro Grading Co., Inc., 111 Wis.2d 431, 438-439, 331 N.W.2d 342 (1983). “The fundamental idea in allowing damages for breach of contract is to put the plaintiff in as good a position financially as he would have been but for the breach.” Id. (quoting Schubert v. Midwest Broadcasting Co., 1 Wis.2d 497, 502, 85, N.W.2d 449 (1957).
In a tort claim, Wisconsin law permits the plaintiff to recover for all consequences—both foreseen and unforeseen—of defendant’s conduct. Pfeifer v. Standard Gateway Theater, Inc., 262 Wis. 229, 240, 55 N.W.2d 29 (1951).
Trigger of Coverage
Definition of an Occurrence
An “accident”, as used in the definition of an “occurrence”, is “an event or condition occurring by chance or arising from unknown or remote causes.” American Family Mut. Ins. Co. v. American Girl, Inc., 2004 WI 2, ¶ 37, 268 Wis.2d 16, 673 N.W.2d 65. A standard CGL policy does not explicitly preclude coverage for a breach of contract. Id.
Allegations of fraud, misrepresentations, and deceptive or misleading statements, however, do not constitute an “occurrence”. A.O. Smith Corp. v. Allstate Ins. Co., 222 Wis.2d 475, 588 N.W.2d 285 (Ct. App. 1998); Stuart v. Weisflog’s Showroom Gallery, Inc., 2008 WI 86, ¶ 45, 756 Wis.2d 448.
Duty to Defend
Wisconsin courts have interpreted additional insured endorsements broadly. Mikula v. Miller Brewing Co., 2005 WI App. 92, 281 Wis.2d 712, 701 N.W.2d 703. There, despite the general contractor having no control over the area in which the plaintiff was injured, the additional insured endorsement in the contract between the contractor and owner of the building required the contractor’s insurance to cover plaintiff’s claim. The court refused to require the complaint to allege alleged or actual negligence on the part of the named insured as a prerequisite to coverage. Id. at ¶ 27.
Generally, “[t]he duty to defend an insured is based on the language in the insurance contract.” Southeast Wis. Prof’l Baseball Park Dist. v. Mitsubishi Heavy Indust. Am. Inc., 2007 WI App 185, P41, 304 Wis. 2d 637, 738 N.W.2d 87. This is true of excess policies, as well, and the duty to defend awarded under the policy, specifically. Johnson Controls, Inc. v. London Mkt., 2010 WI 52, ¶31, 325 Wis. 2d 176, 191, 784 N.W.2d 579, 586.
The duty to defend is personal to each insurer. The obligation is several and the carrier is not entitled to divide the duty nor require contribution from another absent a specific contractual right.” Loy v. Bunderson, 107 Wis. 2d 400, 427, 320 N.W.2d 175, 190 (1982) (quoting United States Fidelity and Guaranty Co. v. Tri-State Ins. Co., 285 F. 2d 579 (10th Cir. 1960)).
Insured’s Right to Independent Counsel and Consequences of Rejecting a Defense
Reservation of Rights
- The Wisconsin Supreme Court has held that the failure to issue a reservation of rights letter does not require an insurer to provide insurance coverage that does not otherwise exist in the insurance contract. Maxwell v. Hartford Union High Sch. Dist., 2012 WI 58, ¶2, 341 Wis. 2d 238, 244, 814 N.W.2d 484, 487.
- However, providing and assuming full control of a defense may be grounds for establishing waiver or estoppel of a forfeiture clause when the insurer fails to issue a reservation of rights. In Hickey v. Wisconsin Mutual Insurance Co., 238 Wis. 433, 300 N.W. 364 (1941), the court discussed a notice provision in an insurance contract-a forfeiture clause-which provided that the insured must give the insurer notice within five days of an accident to receive coverage under the policy. Id. at 434 (statement of the case). The court determined that the coverage at issue was within the scope of the policy and that the insurer’s actions in defending the suit without raising the forfeiture clause defense could constitute waiver of the forfeiture clause. Id. at 436-38.
- A failure to issue a reservation of rights letter does not constitute a breach of the duty to defend or bad faith. Maxwell, 2012 WI 58, ¶59.
Wisconsin statute mandates that every liability insurance policy shall provide:
- That notice given by or on behalf of the insured to any authorized agent of the insurer within this state, with particulars sufficient to identify the insured, is notice to the insurer.
- That failure to give any notice required by the policy within the time specified does not invalidate a claim made by the insured if the insured shows that it was not reasonably possible to give the notice within the prescribed time and that notice was given as soon as reasonably possible.
- An Additional Insured has a duty to provide the insurer notice consistent with the requirements contained in that particular policy. Kreckel v. Walbridge Aldinger Co., 2006 WI App 168, ¶12, 295 Wis. 2d 649, 658, 721 N.W.2d 508, 512.
Wis. Stat. § 632.26(1). Failure to give notice as required by the policy does not bar liability under the policy if the insurer was not prejudiced by the failure, but the risk of nonpersuasion is upon the person claiming there was no prejudice. Wis. Stat. § 632.26(2).
Lack of an Occurrence
- Faulty workmanship, in and of itself, is not an “occurrence.” Acuity v. Soc’y Ins., 2012 WI App 13, ¶24, 339 Wis. 2d 217, 230, 810 N.W.2d 812, 819. However, faulty workmanship may cause an unintended event, i.e., an “occurrence.” See Am. Family Mut. Ins. Co. v. Am. Girl, Inc., 2004 WI 2, ¶48, 268 Wis. 2d 16, 43, 673 N.W.2d 65, 78.
- “When an insured’s intentional actions create a direct risk of harm, there can be no liability coverage for any resulting damage or injury, despite the lack of an actual intent to damage or injure.” Schinner v. Gundrum, 2013 WI 71, ¶70, 349 Wis. 2d 529, 558, 833 N.W.2d 685, 700 (quoting Frankenmuth Mut. Ins. Co. v. Masters, 460 Mich. 105, 595 N.W.2d 832, 839 (Mich. 1999).
- Allegations of fraud do not constitute an “occurrence.” A.O. Smith Corp. v. Allstate Ins. Co., 222 Wis.2d 475, 588 N.W.2d 285 (Ct. App. 1998).
Choice of Law (Forum Selection Clauses)
Pursuant to Wis. Stat. § 779.135(2), provisions in contracts for the improvement of land in Wisconsin that seek to subject the contract to another state’s laws are void.