Stewart v. Farmers Ins. Group

• Decision Date: 25 August 2009
• Docket Number: No. 2008AP1605.,2008AP1605.
• Citation: 2009 WI App 130,773 N.W.2d 513
• Parties: Edley H. STEWART and Lurline E. Stewart, Plaintiffs-Appellants, v. FARMERS INSURANCE GROUP, d/b/a Fire Insurance Exchange, d/b/a Farmers Insurance Exchange, Defendant-Respondent.
• Court: Wisconsin Court of Appeals

773 N.W.2d 513

2009 WI App 130

Edley H. STEWART and Lurline E. Stewart, Plaintiffs-Appellants, v. FARMERS INSURANCE GROUP, d/b/a Fire Insurance Exchange, d/b/a Farmers Insurance Exchange, Defendant-Respondent.

No. 2008AP1605.

Court of Appeals of Wisconsin.

August 25, 2009.

On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Trisha R. Stewart Martin of Stewart Law Offices of Milwaukee.

On behalf of the defendant-respondent, the cause was submitted on the brief of Patrick A. O'Neil of Piper & Schmidt, of Milwaukee.

Before CURLEY, P.J., FINE and KESSLER, JJ.

¶ 1 CURLEY, P.J

Edley H. and Lurline E. Stewart (collectively referred to as the Stewarts) appeal from a judgment and an amended order for judgment issued after the trial court refused to award them actual attorney fees and other expenses following their acceptance of Farmers Insurance Group's, d/b/a Fire Insurance Exchange, d/b/a Farmers Insurance Exchange (collectively referred to as Farmers), offer of judgment. On appeal, in addition to seeking actual attorney fees and other expenses, the Stewarts assert that they are entitled to interest on the amounts awarded to them at arbitration pursuant to WIS. STAT. §§ 628.46 and 814.04(4) (2007-08).¹ We conclude that: (1) when the Stewarts settled their bad faith action for $5000, that settlement encompassed the actual attorney fees and expenses they now seek, which are compensatory damages; and (2) in accordance with the arbitration stipulation, because the Stewarts were not entitled to recover from Farmers due to the fact that the total amount awarded was less than the amount of the Stewarts' settlement with Menards, they are not entitled to interest under §§ 628.46 and 814.04(4). Accordingly, we affirm.

I. BACKGROUND.

¶ 2 On January 10, 2000, Donald Musial, an employee for Menards, drove a Menards truck into the home of Edley and Lurline Stewart. Musial did not have personal automobile insurance at the time. The truck crashed through the Stewarts' living room wall, causing damage to the physical structure of their house and resulting in personal injuries to them. At the time of the incident, the Stewarts had homeowners and automobile insurance through Farmers.

¶ 3 After receiving notice of the accident, a representative from Farmers inspected the damage to the Stewarts' home and personal belongings. On February 29, 2000, Farmers paid the Stewarts $805.97 as a settlement for their personal property claims. The Stewarts returned the check on April 5, 2000, as an unreasonable underestimation of their loss. The Stewarts claim that Farmers never responded to their attempt to negotiate their personal property claim, and Farmers asserts the Stewarts never provided any documentation to support their claim that the value of their property losses exceeded the amount offered.

¶ 4 On April 15, 2002, the Stewarts commenced a lawsuit against Farmers, seeking to recover for the property damage and personal injuries they sustained. The complaint alleged that Farmers breached its insurance contract and acted in bad faith. The Stewarts filed a separate suit against Menards and Musial on January 9, 2003. The two lawsuits were later consolidated. On May 24, 2004, the Stewarts settled with Menards and Musial for $57,000 with a reservation of their right to continue to pursue damages against Farmers in excess of $57,000. After the settlement, the Stewarts continued their bad faith and breach of contract claims against Farmers.

¶ 5 In response to the continued litigation, Farmers filed a motion for summary judgment. The dismissal was eventually granted but reversed on appeal to this court. See Stewart v. Farmers Ins. Group, No.2004AP3058, 290 Wis.2d 510, 712 N.W.2d 86, 2006 WL 327931, unpublished slip op. (2006). Following remand, the parties stipulated to a stay pending arbitration of the Stewarts' claims related to personal injury, property damage, and medical expenses. The stipulation provided that the $57,000 settlement with Menards would be subtracted from the amount awarded at arbitration so that Farmers would only pay the difference. The bad faith claim was not part of the arbitration.

¶ 6 As to the Stewarts' personal property damage, the arbitrator found that all but the $805.97 previously tendered by Farmers was barred by the statute of limitation. In addition, the arbitrator awarded $14,849 on Edley Stewart's personal injury claim and $21,837.50 on Lurline Stewart's personal injury claim, for a total award of $36,686.50. Due to the arbitration stipulation and the amount awarded for damages, Farmers did not owe anything to the Stewarts on their property or personal injury claims (with the exception of the previously tendered $805.97).

¶ 7 Following the arbitration, only the bad faith claim remained and trial was set for March 2008. In February 2008, Farmers made an offer of judgment to the Stewarts "for $5000, plus taxable costs, in exchange for a general release of all claims that they may have against them." The Stewarts accepted this offer, and the court ordered that judgment be entered against Farmers.

¶ 8 The Stewarts subsequently filed with the judgment clerk a notice of taxation with a bill of costs totaling $46,571.73. As costs, they included actual attorney fees, filing and service fees related to their action against Menards, the arbitration fee, and interest on the arbitration award pursuant to WIS. STAT. § 628.46. The Stewarts contended that their acceptance of Farmers' offer of judgment on the bad faith claim entitled them to actual attorney fees and interest. The judgment clerk declined to include all of the proposed costs and instead, entered judgment with costs taxed in the amount of $6,816.57.

¶ 9 Disagreeing with the judgment clerk's award, the Stewarts filed a motion for review of the taxation of costs. The trial court denied the Stewarts' request for actual attorney fees and the various expenses sought, along with their request for interest pursuant to WIS. STAT. §§ 628.46 and 814.04(4). However, based on the version of § 814.04 in effect at the time of the hearing,² the trial court slightly increased the statutory attorney fee and added amounts for photocopying and facsimile expenses. An amended order for judgment was entered in the amount of $7,286.84. The Stewarts now appeal.

II. ANALYSIS.

A. Standard of review.

¶ 10 The Stewarts raise issues related to the recovery of actual attorney fees and other expenses, relying on WIS. STAT. § 814.04(2), and the recovery of statutory interest on the amounts awarded at arbitration, pursuant to WIS. STAT. §§ 628.46 and 814.04(4). Resolution of these issues presents questions of statutory interpretation and application, which are questions of law that this court reviews de novo. See WIREdata, Inc. v. Village of Sussex, 2008 WI 69, ¶ 45, 310 Wis.2d 397, 751 N.W.2d 736.

B. The accepted offer of judgment encompassed the Stewarts' actual attorney fees and the other expenses they seek to recover on appeal.

¶ 11 The parties agree that attorney fees are recoverable as "compensatory damages" in bad faith actions. See DeChant v. Monarch Life Ins. Co., 200 Wis.2d 559, 572-73, 547 N.W.2d 592 (1996) ("When an insurer acts in bad faith, a plaintiff is allowed to recover for all detriment proximately resulting from the insurer's bad faith, which includes ... those attorney's fees that were incurred to obtain the policy benefits that would not have been incurred but for the insurer's tortious conduct.") (footnote omitted). The parties differ, however, with respect to their assessment of the effect that the compensatory damages label has on the Stewarts' recovery of actual attorney fees in this matter. According to the Stewarts, WIS. STAT. § 814.04(2)'s provision that costs shall include "[a]ll the necessary disbursements and fees allowed by law" makes clear that they are entitled to tax their actual attorney fees because such fees are allowed by law under DeChant. That case law categorizes attorney fees in bad faith actions as compensatory damages, and not costs, according to the Stewarts is not significant. In contrast, Farmers emphasizes the label and takes the position that attorney fees in bad faith actions are an item of damages—not costs—and as such are not recoverable under § 814.04(2).

¶ 12 Pursuant to WIS. STAT. § 807.01(1), "[a]fter issue is joined but at least 20 days before the trial, the defendant may serve upon the plaintiff a written offer to allow judgment to be taken against the defendant for the sum, or property, or to the effect therein specified, with costs."³ The costs referenced relate to those set forth in WIS. STAT. § 814.04, including "[a]ll the necessary disbursements and fees allowed by law."⁴ Sec. 814.04(2); see also Alberte v. Anew Health Care Servs., Inc., 2004 WI App 146, ¶ 8, 275 Wis.2d 571, 685 N.W.2d 614.

¶ 13 The Stewarts rely on cases involving fee-shifting provisions to support their argument that WIS. STAT. § 814.04(2) should be interpreted to allow taxation of all disbursements and fees allowed by law even when not labeled as taxable costs in the law authorizing recovery of fees and expenses. See Kolupar v. Wilde Pontiac Cadillac, Inc., 2007 WI 98, ¶¶ 3-4, 303 Wis.2d 258, 735 N.W.2d 93 (Kolupar II) (allowing recovery of reasonable attorney fees and costs related to plaintiff's claim under fee-shifting provision of consumer protection statute regulating motor vehicle dealers); Alberte, 275 Wis.2d 571, ¶ 8, 685 N.W.2d 614 (explaining that in accordance with relevant fee-shifting provisions, the plaintiff was entitled to her reasonable attorney fees as an item of costs under WIS. STAT. § 814.04(2) for claim arising under the Americans with Disabilities Act and Title VII of the Civil Rights Act); Purdy v. Cap Gemini Am., Inc., 2001 WI App 270, ¶¶ 3, 13, 248 Wis.2d 804, 637 N.W.2d 763 (holding that in a contract case providing that the prevailing party could recover "all expenses (including...