Weiss v. United Fire and Cas. Co.

• Decision Date: 15 December 1995
• Docket Number: No. 93-3341,93-3341
• Parties: James WEISS, Plaintiff-Appellant-Cross Respondent-Petitioner, v. UNITED FIRE AND CASUALTY COMPANY, Defendant-Respondent-Cross Appellant.
• Court: Wisconsin Supreme Court

Page 753

541 N.W.2d 753

197 Wis.2d 365

James WEISS, Plaintiff-Appellant-Cross Respondent-Petitioner, v. UNITED FIRE AND CASUALTY COMPANY, Defendant-Respondent-Cross Appellant.

No. 93-3341.

Supreme Court of Wisconsin.

Argued Sept. 6, 1995.

Decided Dec. 15, 1995.

For the plaintiff-appellant-cross respondent-petitioner there were briefs by Toby E. Marcovich, George L. Glonek and Marcovich, Cochrane & Milliken, Superior and oral argument by Toby E. Marcovich.

For the defendant-respondent-cross appellant there was a brief by Michael F. Durst, Terri L. Lehr and Weiby, Maki, Durst, Ledin & Bick, S.C., Superior and oral argument by Terri L. Lehr.

Amicus curiae brief was filed by Susan J. Reigel and Everson, Everson, Whitney & Brehm, S.C., Green Bay for the Civil Trial Counsel of Wisconsin.

Amicus curiae brief was filed by Timothy J. Muldowney and LaFollette & Sinykin, Madison for the Wisconsin Insurance Alliance.

SHIRLEY S. ABRAHAMSON, Justice.

James Weiss, the insured plaintiff, seeks review of an unpublished decision of the court of appeals, Weiss v. United Fire & Casualty Co., No. 93-3341, 188 Wis.2d 81, 524 N.W.2d 648 (Wis.Ct.App. Sept. 27, 1994), affirming a judgment of the Douglas County circuit court, Robert E. Eaton, judge. The judgment granted the motion of the defendant, United Fire and Casualty Company, the plaintiff's insurer, to change answers in the verdict pursuant to Wis. Stat. § 805.14(5)(c) (1993-94), to conform with the circuit court's dismissal of the plaintiff's bad faith claim. In answering the verdict questions relating to the bad faith claim, the jury found (1) that United Fire had exercised bad faith in denying the plaintiff's claim and (2) that $225,000 should be awarded the plaintiff as punitive damages for the tort of bad faith. We reverse the part of the decision of the court of appeals which is before us ¹ and remand the cause to the circuit court with directions to reinstate the jury verdict and to enter judgment in accordance with this decision.

Three issues are presented for our review. First, relying upon the court of appeals' holding in Heyden v. Safeco Title Ins. Co., 175 Wis.2d 508, 498 N.W.2d 905 (Ct.App.1993), United Fire contends that the plaintiff cannot prevail on a bad faith tort claim against it without first introducing expert testimony concerning what a reasonable insurer would have done under the particular facts and circumstances to ensure a fair and neutral evaluation of its insured's claim.

We reject the circuit court's and court of appeals' brightline rule requiring expert testimony in all bad faith tort claims. Cases presenting particularly complex facts and circumstances outside the common knowledge and ordinary experience of an average juror will ordinarily require an insured to introduce expert testimony to establish a prima facie case for bad faith. Under the facts and circumstances of other cases, however, the question of whether an insurer has breached its duty as a reasonable insurer to evaluate its insured's claim fairly and neutrally will remain well within the realm of the ordinary experience of an average juror and therefore will not require expert testimony. As this court has previously stated, "[t]he requirement of expert testimony is an extraordinary one, and is to [be] applied by the trial court only when unusually complex or esoteric issues are before the jury." White v. Leeder, 149 Wis.2d 948, 960, 440 N.W.2d 557 (1989) (citing Netzel v. State Sand & Gravel Co., 51 Wis.2d 1, 7, 186 N.W.2d 258 (1971)).

Second, United Fire contends that even should we hold, as we do, that the plaintiff was not required to introduce expert testimony to establish his bad faith claim, the verdict should be overturned because the plaintiff failed to introduce sufficient evidence in his case in chief to establish a bad faith claim. Our review of the record, as set forth below, leads us to conclude that the plaintiff produced sufficient evidence in his case in chief to establish his bad faith tort claim; therefore the jury's verdict should stand.

Third, United Fire asserts (1) that the jury did not award the plaintiff compensatory damages on his bad faith claim and (2) that United Fire's conduct does not warrant a punitive damages award. Therefore United Fire contends that even should we uphold the verdict finding that it exercised bad faith in denying the plaintiff's insurance claim, the plaintiff is not entitled to the punitive damages which the jury awarded him. Because we conclude that the jury did award the plaintiff compensatory damages on his bad faith claim and because we also conclude that the evidence supports the jury's finding that punitive damages were warranted, we remand the cause to the circuit court with directions to reinstate the jury's punitive damage award as well.

I.

For purposes of this review the facts are undisputed. Some facts follow and additional pertinent facts are set forth in the discussion of the legal issues.

On the morning of December 20, 1990, the plaintiff set out from his home in Iron River, Wisconsin, to join his family for the holidays. When he arrived in Onalaska, Wisconsin, some five hours later, he was met with the news that a fire had broken out shortly after he left Iron River; his home had been completely gutted. Three months later, United Fire informed the plaintiff that because it believed he had intentionally set fire to the house, his claim for $149,250 of losses under his fire insurance policy was denied. The plaintiff brought suit against United Fire shortly thereafter, alleging both breach of contract and the tort of bad faith.

A three-day jury trial followed in October of 1993. At the close of the plaintiff's case in chief, the circuit court granted United Fire's motion to dismiss the plaintiff's bad faith claim. Relying on Heyden, 175 Wis.2d 508, 498 N.W.2d 905, the circuit court concluded that the plaintiff's failure to introduce expert testimony regarding the reasonableness of United Fire's conduct in denying the claim was fatal. Citing Mills v. Regent Ins. Co., 152 Wis.2d 566, 449 N.W.2d 294 (Ct.App.1989), the circuit court also concluded that, entirely apart from the question of the plaintiff's failure to introduce expert testimony, the plaintiff had failed to produce sufficient evidence to establish a prima facie bad faith claim.

In the interest of avoiding a second trial on the issue of punitive damages in the event that its ruling was reversed, the circuit court nevertheless agreed to submit special verdict questions to the jury regarding the plaintiff's bad faith claim. At the same time, however, the circuit court made clear its intention to abide by its original ruling and direct a verdict for the defendant on the issue of bad faith, regardless of how the jury answered the special verdict questions on bad faith. ²

The jury found that the plaintiff did not intentionally cause the fire to his residence and that United Fire had breached its contract with the plaintiff. The jury also found that United Fire had exercised bad faith toward the plaintiff in its investigation and processing of his claim, and awarded him compensatory and punitive damages.

After the jury was excused, the circuit court reversed the jury's special verdict answers finding that United Fire had breached its duty of good faith and assessing punitive damages against United Fire as a consequence of that breach. The court of appeals affirmed the decision of the circuit court.

II.

We now turn to the issue of whether expert testimony is required as a matter of law to establish a bad faith claim against an insurer.

To establish a claim for bad faith, the insured "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." Anderson v. Continental Ins. Co., 85 Wis.2d 675, 691, 271 N.W.2d 368 (1978). The first prong of this test is objective, while the second prong is subjective. Benke v. Mukwonago-Vernon Mut. Ins. Co., 110 Wis.2d 356, 362, 329 N.W.2d 243 (Ct.App.1982).

Under the first prong, the insured must establish that, under the facts and circumstances, a reasonable insurer could not have denied or delayed payment of the claim. James v. Aetna Life & Casualty Co., 109 Wis.2d 363, 370, 326 N.W.2d 114 (Ct.App.1982). In applying this test, it is appropriate for the trier of fact to determine whether the insurer properly investigated the claim and whether the results of the investigation were subjected to reasonable evaluation and review. Anderson, 85 Wis.2d at 692, 271 N.W.2d 368. In other words, under the first prong of the Anderson test, to determine whether the insurer acted in bad faith the trier of fact measures the insurer's conduct against what a reasonable insurer would have done under the particular facts and circumstances to conduct a fair and neutral evaluation of the claim. ³

In Wisconsin, expert testimony is generally admissible if the person testifying is qualified and if the testimony will help the trier of fact to understand the evidence or to determine a fact in issue. Wis.Stat. § 907.02 (1993-94); Kerkman v. Hintz, 142 Wis.2d 404, 422-23, 418 N.W.2d 795 (1988). A circuit court's decision about admission of expert testimony is largely a matter within the discretion of the circuit court. Kerkman, 142 Wis.2d at 422, 418 N.W.2d 795; State v. Friedrich, 135 Wis.2d 1, 15, 398 N.W.2d 763 (1987).

The court has long recognized that certain kinds of evidence are difficult for jurors to evaluate without the benefit of expert testimony. Cedarburg Light & Water Comm'n v. Allis-Chalmers, 33 Wis.2d 560, 567, 148 N.W.2d 13 (1967). When confronted with such a case, "the trial court may decline, upon motion, to permit the case to go to the jury in the absence of expert testimony...." Id.

But the court has simultaneously emphasized that requiring expert testimony rather than simply...