O'Meara, Leer, Wagner & Kohl, P.A. News

Minnesota Supreme Court Holds School’s Conduct Created A Foreseeable Risk Of Harm When A Student Driving To An Athletic Event Injured Members Of The Public

November 28th, 2018

In a 4-2 decision, the Minnesota Supreme Court determined that a trial must determine whether a school’s own conduct created a foreseeable risk of harm to a member of the motoring public when a vehicle driven by a student to an out of town athletic event crossed the center line and collided with another vehicle causing injury.  Fenrich v. The Blake School, A17-0063, (Minn. 2018). In doing so, the Court may have expanded a school’s liability to non-student third parties injured by students driving to and from athletic events, even events not mandated by the school.

A sixteen-year-old high school student was driving his teammates and a volunteer coach to an athletic competition in Sioux Falls, South Dakota when he caused a fatal crash with another vehicle.  A passenger in the other vehicle., Mrs. Fenrich, brought a negligence action against The Blake School on behalf of her and her deceased husband, who was the driver.

The school moved for summary judgment and the district court granted the motion, finding that school did not owe a duty of care to members of the general public. Mrs. Fenrich appealed and the Court of Appeals affirmed the district court, but found that the school’s conduct did not create a foreseeable risk of injury to a foreseeable plaintiff.

Mrs. Fenrich appealed again.  The Minnesota Supreme Court held that summary judgment was not proper in this case, and thus reversed the court of appeals, and held a trial was necessary.

The Minnesota Supreme Court began the analysis by laying out the elements of negligence (the existence of a duty of care, a breach of that duty, an injury, and the breach of the duty being the proximate cause of the injury). The Court held this case turns on the first element: an existence of a duty of care.

The Court stated generally a person does not owe a duty of care to another if the harm is caused by a third party’s conduct. The Court reviewed the two exceptions to this rule: first when there is a “special relationship” between a plaintiff and defendant and the harm to the plaintiff is foreseeable, or second, when the defendant’s “own conduct” creates a foreseeable risk of injury to a foreseeable plaintiff. The Court found there was no special relationship.

The Court analyzed the second exception, the defendant’s “own conduct” next. The Court found that the school went beyond passive inaction by assuming supervision and control over the athletic team’s trip to Sioux Falls, when the head coach strongly encouraged the entire team to participate, the assistance coach paid the bulk of the registration fee, and the coaches were active in preparation for the meet, including the assistance coach attending one of the practices and recruiting a volunteer coach to run them. The Court essentially extends the school’s conduct to an optional extracurricular activity because of the actions of the coaches helping to coordinate the event.

The Court then analyzed whether the accident was foreseeable. The Court held that the student’s driving created an objectively reasonable expectation of danger call because he was a teenage driver who had been licensed for less than six months, was driving a lengthy distance with no adults in the car, and was under no instruction to minimize distractions. (It was later determined the driver was likely distracted by his cell phone when he caused the accident). The Court held for these reasons, the accident was potentially foreseeable, summary judgment was improper and a trial was necessary to resolve the fact issue.

The dissent by Justice Anderson, and joined by Chief Justice Gildea, is worth mentioning. They find that the majority is “significantly expanding the potential liability of schools by holding the respondent, The Blake School, potentially liable to the general public for the negligence of a student who drove his family’s personal vehicle to a post-season weekend athletic event.” The dissent determined that the Court has never before imposed a duty on a school to protect the general public from injury caused by a student’s negligence off of school grounds. The dissent warned that allowing for potential liability on behalf of the school in cases like these creates the possibility that extracurricular and co-curricular activities will be disbanded or disaffiliated from the school. The dissent states the majority opinion provides no limiting principle if the school faces liability because the coaches helped coordinate some aspects of the trip, and encouraged team members to participate. The dissent found that the majority essentially holds that a school may be liable for the safety of members of the general public when students drive to or from a school-encouraged activity.

OUR VIEW.  While the majority opinion asserts that it has announced “no new rule of law” with the Fenrich decision, the impact of the court’s ruling may prove otherwise.  It is true that traditional notions of negligence law were applied in the case, but it is how the law was applied that causes concern.  The implication is that any school-sanctioned event involving transportation supplied by students will expose schools (both public and private) to liability should a member of the public become injured in an accident with a student driving to the event.

If you have any questions regarding the court’s decision or any other school related issues, please contact a member of our Education Law Practice Group at (952) 806-0408.  This case law update and other court opinion updates are available in .pdf form on the News and Resources page of our Firm’s website: www.OLWKLaw.com.

Shamus O’Meara Authors School Security Article for National School Boards Association

October 22nd, 2018

Shamus O’Meara, a nationally recognized school safety and security expert, recently authored an article entitled Advising Schools in the Age of School Shootings for presentation at the National School Boards Association Council of School Attorneys fall conference in Charleston.

The article addresses best practices for school security design using crime prevention techniques, related liability risks, and reflects on the history of school shootings and our nation’s efforts in responding to these tragedies.

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Shamus has been through many crises with school officials, including representing two Minnesota school districts involved with school shooting incidents.  He has worked with state and national departments of education, public and private educational institutions, mental health and law enforcement agencies to promote safety and violence prevention in our schools and on campuses.  He also serves as a consultant and expert witness for school districts, higher educational institutions and businesses, providing recommendations and guidance involving safety and security issues.

Shamus will be presenting on school security design at the November EDspaces conference in Florida, and the 2019 National School Boards Association annual conference in Philadelphia.

Contact information: SPOmeara@olwklaw.com, 952.806.0438

Shamus O’Meara Presents on School Security in New Mexico

September 12th, 2018

Shamus O’Meara recently presented on School Security Design at the New Mexico Counsel of School Attorneys Conference in Albuquerque.  Shamus counsels educational institutions and businesses on safety and emergency management matters, and partners with state and national education and law enforcement agencies to promote safety and violence prevention in schools and on campuses.  He also serves as an expert witness and consultant to a variety of clients on security matters.

For more information on O’Meara Leer Wagner & Kohl’s Safety and Emergency Management Practice Group contact Shamus P. O’Meara.

Best Lawyers in America© Recognizes Two O’Meara, Leer, Wagner & Kohl Shareholders for 2019

September 11th, 2018

The litigation firm O’Meara, Leer, Wagner & Kohl, P.A. in Minneapolis is pleased to announce that Shareholders Dale O. Thornsjo and Christopher E. Celichowski have been selected by their peers for inclusion in The Best Lawyers in America 2019. Mr. Thornsjo is selected in the fields of Insurance Law, and Mass Tort Litigation / Class Actions – Defendants. Mr. Celichowski was selected in the field of Workers’ Compensation Law – Employers. Congratulations Dale and Chris!

This marks the 25th Edition of The Best Lawyers in AmericaBest Lawyers® recognition is based entirely on an exhaustive peer review evaluation.  The methodology is designed to capture, as accurately as possible, the consensus opinion of leading lawyers about the professional abilities of their colleagues within the same geographical area and legal practice area. Best Lawyers employs a sophisticated, conscientious, rational and transparent survey process designed to elicit meaningful and substantive evaluations of the quality of legal services.  Lawyers are not required or allowed to pay a fee to be listed. Corporate Counsel magazine has described  Best Lawyers as “the most respected referral list of attorneys in practice.”

O’Meara Leer Wagner & Kohl Attorneys Tim Leer, Shamus O’Meara and Dale Thornsjo Named 2018 SuperLawyers; Lance Meyer Named 2018 Rising Star

August 21st, 2018

O’Meara, Leer, Wagner and Kohl is proud to announce that three of the Firm’s shareholders –Timothy J. Leer, Shamus P. O’Meara, and Dale O. Thornsjo – have once again been recognized as “Super Lawyers” by their peers in Minnesota.  Joining them this year is Associate Lance D. Meyer who is recognized as a “Rising Star” by his peers. “Super Lawyers” and “Rising Star” recognitions are annually published by
Super Lawyers Magazine. See the edition here.

There’s Something About Stairy

August 9th, 2018

Minnesota Supreme Court Affirms “Increased Risk” Test as Appropriate Standard for Injuries “Arising Out of Employment”

In a 4-2 decision issued yesterday the Minnesota Supreme Court held that “an injury arises out of employment when there is a causal connection between the injury and the employment” and that an employee sustained a compensable injury when she fell down a set of clean, well-lit and OSHA-compliant stairs while carrying a plant in both hands with her purse hanging off her elbow. Roller-Dick v. CentraCare Health Sys. and SFM Mut. Co., A17-1816 (Minn. 2018). In doing so, it added to the growing body of case law interpreting the “increased risk test”.

Roller-Dick worked on the second floor of an office building. Every work day she took the stairs from the second floor to leave. On the date of the injury, she began walking down the stairs, a purse hanging from her elbow and a plant in her hands. She slipped on the second stair out of ten, fell down the remaining stairs and fractured her left ankle. The stairs were coated with rubber and hand railings extended along both sides of the staircase. Roller-Dick testified at trial she fell because her rubber-soled shoes stuck to the rubber on the staircase. (She dropped this allegation on appeal.) At the time of her injury, the stairs were dry and compliant with building and OSHA codes.

A compensation judge denied her workers’ compensation claim, finding her injury did not “arise out of“ her employment. Roller-Dick appealed to the Minnesota Workers’ Compensation Court of Appeals (WCCA).

The WCCA reversed, holding the compensation judge incorrectly applied the “increased risk” test to deny her claim. It ruled a flight of stairs could not be considered a neutral risk because stairs increased the likelihood and severity of an injury. The Court found Roller-Dick did not have to prove there was something about the staircase that further increased her risk of injury. Rather, they concluded the “stairs alone increased her risk, and therefore, [her] injury arose out of her employment.”

The employer appealed to the Minnesota Supreme Court, which ­­­­­affirmed WCCA’s decision, holding the undisputed circumstances of Roller-Dick’s injury created an increased risk that she would fall and injure herself on the stairs.

The Supreme Court began its analysis by distinguishing between “special hazards” created by employment and hazards created by “neutral conditions” not inherently dangerous or risky but which still increase the employee’s exposure to injury. To illustrate the latter type of case, they discussed their 1983 decision in Kirchner v. Anoka which held an employee’s injury arose out of employment when he descended the stairs without using a handrail because other people were on the side of the stairs with the only handrail. Although the stairs were not obviously hazardous, Kirchner encountered a set of circumstances – the need to descend the stairs without a handrail – that increased his risk of injury. Dykhoff, in contrast, was a “neutral condition” case involving an unexplained fall with no causal connection between her work environment and her injury; therefore, her injury did not arise out of her employment.

The Court also reviewed post-Dykhoff decisions.  It distinguished Kubis from Hohlt. They considered Kubis as a case in which the WCCA inappropriately exceeded its standard of review and substituted its own factual findings and assessment of witness credibility. In contrast, they viewed Hohlt as a case involving misapplication of the law – the “increased risk” test. The Supreme Court affirmed the WCCA’s position that Hohlt’s employment exposed her to a hazard – an icy sidewalk – that caused her injury. According to the Court, Hohlt affirmed the core principles underlying its conclusion in Dykhoff: “[F]or an injury sustained on employer’s premises to arise out of employment, the employee must have faced a hazard that originated on the premises as part of the working environment, thus supplying the requisite causal connection between the injury and employment. Such injuries are explained due to the employee’s exposure to the hazard. Injuries caused by inexplicable slip-and-falls, as was at issue and Dykhoff, do not arise out of employment because employees in such cases have not faced a hazard which would explain the cause of their injury.”  According to the Court, the rule is: “an injury arises out of employment when there is a causal connection between the injury and the employment.”.

The Supreme Court conceded there was nothing wrong with the stairs or stairway. Roller-Dick did not use the handrails while descending the stairs because she was carrying a plant and her handbag. “These circumstances created an increased risk that [she] would fall and injure herself on the stairs, thus satisfying the requisite causal connection between the workplace and her injury.” They felt the case was on point with Kirchner.

The Court majority rejected any attempt to, in their view, insert negligence concepts into the legal determination regarding whether an injury arose out of employment by considering the good or bad choices made by an employee which may have caused or even contributed to her injury. The Supreme Court explicitly noted, “We need not hold today, as the WCCA did, that stairs themselves are workplace hazards exposing employees to an increased risk of injury…Whether stairs generally are hazardous is a matter for another case and another record.”

Chief Justice Gildea, joined by Justice Anderson, dissented. The Chief Justice believed the majority misapplied the law, improperly merged the “arising out of” and “in the course of” requirements, and essentially created a single compensability test. She argued the majority ignored the “arising out of” causation standard and simply held that because the injury happened at work, it was compensable. Chief Justice Gildea concluded Roller-Dick failed to meet the “arising out of” requirement because the employer provided a “safe, non-hazardous stairway for its employees to use” and the employee chose not to use the provided handrails. She felt the Supreme Court’s decision in Kirchner was consistent with her view because the employer in Kirchner provided only one handrail, and the injury was caused by the absence of a second handrail; therefore, it arose out of his employment. In other words, Kirchner’s injury was compensable because he had no choice to use the single handrail; Roller-Dick’s injury was not compensable because she had a choice to use either one of the two handrails and used neither. According to Chief Justice Gildea, “Nothing about Roller-Dick’s employment dictated that choice.”

OUR VIEW

We anticipate Minnesota’s workers’ compensation courts will continue to wrestle with the appropriate application of the “increased risk test” announced in Dykhoff.  We are pleased the Minnesota Supreme Court affirmed the “increased risk” test as the appropriate standard for deciding when injuries “arise out of” employment. We are also pleased the Court did not adopt the WCCA’s position that stairs are, as a matter of law, a hazardous condition and any fall on the stairs at work is compensable under Minnesota’s Worker’s Compensation statute. While we would have preferred the Supreme Court to explicitly reject that conclusion, we also recognize the Court appropriately exercised judicial restraint in not going beyond what was essential to decide the case.

Please contact any of the attorneys in O’Meara, Leer, Wagner & Kohl’s Workers’ Compensation Practice Group if you have any questions about how the Supreme Court’s holding in Roller-Dick may apply to your claims.

 

Federal Appeals Court Affirms Minnesota District Court’s Authority to Order State to Comply with Landmark Settlement Benefitting People with Disabilities

July 27th, 2018

In 2011, O’Meara Leer Wagner & Kohl negotiated a landmark class action settlement with the State of Minnesota on behalf of people with disabilities across the state. In the Settlement, the State agreed to create an Olmstead Plan, eliminate the use of physical and chemical restraints and seclusion, close state facilities that were utilizing abusive practices, and provide training to State employees. The Court approved the Settlement and ordered the State to implement its terms, while retaining jurisdiction to ensure the State’s compliance with the Settlement.

In 2017, after years of submission to the Court’s authority, the State initiated a challenge to the Court’s ongoing jurisdiction, seeking to dismiss the case before it had properly complied with the terms of the Settlement. The Court denied the challenge and the State appealed the decision.

On July 26, the Eighth Circuit Court of Appeals denied the State’s appeal, ruling the District Court properly retained authority over the State to review its compliance with the Settlement.  Read more here and review the Eighth Circuit Court of Appeals decision here.

Minnesota Supreme Court Affirms WCCA Award of .191 Attorney Fees

July 24th, 2018

The Minnesota Supreme Court recently affirmed the Minnesota Workers’ Compensation Court of Appeals (WCCA), holding an attorney is entitled to reasonable fees under Minn. Stat. §176.191 and the award of reasonable attorney’s fees should cover the value of the attorney’s representation, even time spent developing ultimately unsuccessful arguments. Hufnagel v. Deer River Health Care, et al., A17-2064 (Minn. 2018).

Hufnagel, working as a certified nursing assistant, sustained multiple work-related low back injuries. Her first injury occurred in 2009 while working for Deer River. In 2013, Deer River became Essentia Health-Deer River and changed workers’ compensation insurers. She alleged additional injuries in 2014 and 2015 but Essentia denied liability stating her injury was merely a “continuation of the prior work injury from 2009 [with Deer River], which was under a different insurer.”  Hufnagel filed a Claim Petition against Deer River seeking benefits for the admitted 2009 date of injury. Deer River asked Hufnagel to add Essentia as a party. When Hufnagel refused, Deer River filed a motion to join Essentia which the compensation judge granted. Both employers and their insurers obtained multiple IMEs, each placing responsibility on the other.

Following trial, the compensation judge found the disputed medical care was reasonable and related to the 2009, 2014, and 2015 work injuries. While the compensation judge also found the 2009 injury continued to be a substantial contributing factor to the claimant’s overall low back condition, the compensation judge denied apportionment between the injuries because the 2014 and 2015 injuries were temporary and the compensation judge held Essentia (the new employer) liable for TTD and medical benefits related to the 2014 and 2015injuries. Hufnagel’s attorney filed a Statement of Attorney Fees requesting Roraff/Irwin fees, and, alternatively, fees under Minn. Stat. §176.191 subd. 1 (i.e., .191 fees). The compensation judge found Hufnagel’s attorney failed to differentiate between the time spent on the 2009 injury and the time spent on the 2014 and 2015 injuries. The judge said that because this was not a dispute “primarily between insurers” and there were no benefits specifically awarded for the 2009 injury, Hufnagel’s attorney was not entitled to .191 attorney fees. The judge awarded Hufnagel’s attorney $8,000 in Roraff/Irwin fees, substantially less than the $31,120.47 in fees claimed.

Hufnagel’s attorney appealed to the WCCA. The WCCA reversed and held the employers had “‘rendered the apportionment a significant issue…and greatly increased the burden on the employee’s counsel to provide effective representation’ by seeking to place sole liability on each other.” The WCCA said disallowing .191 fees denied Hufnagel’s attorney “adequate compensation” for the representation provided. Furthermore, the WCCA concluded that when the compensation judge evaluated the claim for Roraff/Irwin fees, the compensation judge inappropriately treated the time spent in the 2009 injury as unreasonable. The WCCA vacated the compensation judge’s order on attorney fees and Essentia appealed to the Minnesota Supreme Court.

The Minnesota Supreme Court affirmed the WCCA. It found there was a dispute between Hufnagel’s two employers and their insurers which would entitle her attorney to hourly .191 fees. The Court noted that under Minn. Stat. §176.191 subd. 1, when two or more such insurers dispute liability for benefits, the compensation judge must award attorney fees. (The statute uses the word “shall”.) The court held the dispute arose when Essentia denied liability. The court suggested that by denying liability, Essentia attempted to shift the burden to Deer River and this created “a dispute between two employers”, thus invoking Minn. Stat. §176.191 subd. 1. The court inferred that both employers/insurers conceded Hufnagel was entitled to benefits from somebody, but disputed which of them was responsible. It concluded that the efforts by the employers and insurers to shift responsibility to the other “greatly increased the burden” on Hufnagel’s attorney and that he was entitled to receive reasonable .191 attorney fees.

The court also concluded Hufnagel’s attorney was entitled to fees for time spent developing the 2009 injury. It found that “Although no compensation was awarded to the employee for the 2009 injury as a result of this litigation, the 2009 injury was directly related to the benefits the employee successfully obtained for the 2014 and 2015 injuries.” It found attorneys should be compensated for the preparation required to thoroughly represent clients, not just for time developing arguments that are ultimately successful. Thus, an award of reasonable fees should be adequate to compensate the attorney for the value of the representation provided, including the time reasonably necessary to thoroughly prepare. The court took pains to note that “an ‘adequate’ and ‘reasonable’ fee is not an excessive fee nor an award that compensates the attorney twice.”

OUR VIEW: We view Hufnagel as a fact-specific case which does not represent a departure from established Minnesota law. We do not believe it breaks any new legal ground in Minnesota Worker’s Compensation cases nor does it expand the cases in which .191 fees may be payable. The key, in our view, is the Supreme Court’s “inference” that both employers/insurers conceded the employee’s claims were compensable and that the main issue was the allocation or apportionment of responsibility between them. We believe that an award of .191 fees is not appropriate in a case where there is a legitimate, substantive dispute about an employee’s entitlement to the benefits claimed.

If you have questions regarding the Minnesota Supreme Court’s decision or any other workers’ compensation issues, please contact the O’Meara Leer Wagner & Kohl Workers’ Compensation Group at (952.831.6544).

Wisconsin Supreme Court Addresses What it Takes to Properly Plead a Claim of Successor Liability in Wisconsin and How, When Properly Pled, the Fraudulent Transaction Exception to Wisconsin’s Successor Non-Liability Rule is Analyzed

June 7th, 2018

In a split decision, the Wisconsin Supreme Court recently held in Springer v. Nohl Electric Products Corp., No. 2015AP829 (May 15, 2018) that a plaintiff who pled only allegations of negligence and strict liability failed to state a claim of successor liability.  Although it did not need to reach the issue given its decision, the supreme court held in the process that the Wisconsin Uniform Fraudulent Transfer Act (“WUFTA”) does not govern the “fraudulent transaction” exception to the general rule of successor non-liability in Wisconsin.  In other words, had the plaintiff properly pled a claim of successor liability based on the fraudulent transaction exception to successor non-liability, her claim would have been governed by the common law of fraudulent conveyances, not the WUFTA.

The facts of Springer are somewhat complicated.  Plaintiff sued several companies alleging negligence and strict liability after her husband died of mesothelioma allegedly due to asbestos exposure. Two of the defendants were Fire Brick Engineers Company Inc. and Powers Holding Inc. That is where things get complicated.

Fire Brick Engineers “FBE1” was formed in the 1940s and had several successors up until 1983, when a group of investors formed a company also known as Fire Brick Engineers Company “FBE2”, for the purpose of acquiring the assets of FBE1. As part of the asset purchase, FBE2 agreed to accept some of FBE1’s liabilities but disclaimed the assumption of most of FBE1’s liabilities, including tort liabilities. Years later, FBE2 merged with Curtis Industries, and the two companies became Powers Holdings, Inc., which currently does business under the name Fire Brick Engineers Company. FBE2 no longer exists as a separate entity, and importantly, neither FBE2 nor Powers ever manufactured, distributed, or dealt with asbestos-containing products.

Plaintiff did not name FBE1 as a defendant and did not allege that Powers Holdings Inc. was liable for Fire Brick’s negligence as the successor to Fire Brick Engineers Company Inc. in her complaint.  Based on this corporate history,  Powers asserted that Plaintiff had sued the wrong company and moved for summary judgment.  In opposition, Plaintiff argued for the first time that Powers was liable as a successor to FBE1 under the “mere continuation” or “de facto merger” exceptions to Wisconsin’s general successor non-liability rule.  After additional discovery, Powers amended its motion, and Plaintiff additionally argued that the “fraudulent transaction” exception should apply.  But Plaintiff never amended her complaint to add allegations of successor liability against Powers.

The circuit court granted Powers’ motion and dismissed FBE2 and Powers from the case.  Plaintiff appealed, and the court of appeals determined that the circuit court failed to properly analyze the fraudulent transaction exception under the WUFTA.  It therefore reversed and remanded so that a jury could determine whether Powers should be held responsible for the liabilities of FBE1 under the WUFTA.

The supreme court granted further review and reversed, reinstating the circuit court’s dismissal of FBE2 and Powers.  The supreme court disagreed that the WUFTA governs the fraudulent transaction exception to the rule of successor non-liability.  But it went a step further.  Rather than remanding for further proceedings, the supreme court held sua sponte that Plaintiff had not pled a claim of successor liability so as to warrant further proceedings as to FBE2 and Powers.

The supreme court began by addressing the fraudulent transaction exception, which was the sole issue raised on appeal.  As background, a corporation which purchases the assets of another corporation generally does not succeed to the liabilities of the selling corporation. This rule protects an innocent purchaser from liabilities caused by a predecessor corporation. But there are four well-recognized exceptions to the general rule of successor non-liability, including a fraudulent transaction exception, which allows for successor liability when a transaction is entered into fraudulently to escape liability of their obligations.  The issue before the supreme court in Springer was how the exception should be analyzed.

The supreme court held that the exception remains a common-law exception and that the WUFTA has not supplanted the common law when it comes to applying the fraudulent transaction exception to the rule of successor non-liability.  Unlike the fraudulent transaction exception, which is meant to prevent successor companies from avoiding obligations incurred by their predecessors, the WUFTA is designed to assist creditors in collecting on claims that may be frustrated by recent asset transfers.  The WUFTA thus fulfills a purpose quite separate from that of the fraudulent transaction exception.

But, again, the supreme court did not stop there.  The supreme court went on to hold that Plaintiff’s claims against FBE2 and Powers were properly dismissed because Plaintiff had failed to properly plead a claim of successor liability.  The court reasoned that a claim of successor liability, as distinct from a claim based on the underlying tort, puts on the plaintiff the burden of establishing one of the exceptions to the general rule of successor non-liability in Wisconsin.  In other words, the elements of a successor liability claim are distinct from the familiar elements of duty, breach, causation, and damage that a plaintiff must plead to state a negligence claim.  Because Plaintiff pled the latter and not the former, the supreme court determined that her claims were properly dismissed.

Two justices dissented. They would have held that courts may consult the WUFTA when determining whether the fraudulent transaction exception applies. But they also took issue with the majority’s sua sponte dismissal of Plaintiff’s claims against FBE2 and Powers, expressing due process concerns.

If you have questions regarding the Wisconsin Supreme Court’s decision or any other general liability issues, please contact Lance D. Meyer or one of our Firm’s other liability attorneys at (952.831.6544).

Wisconsin Supreme Court Holds Negligent Supervision is Not an “Occurrence”

May 23rd, 2018

In a 4-3 decision, the Wisconsin Supreme Court recently held in Talley v. Mustafa, No. 2015AP2356, 2018 WI 47 (May 11, 2018) that an employer’s business-owners liability policy does not cover a negligent supervision claim arising out of an employee’s intentional act of physically punching a customer in the face.  The court reasoned, “When the negligent supervision claim pled rests solely on an employee’s intentional and unlawful act without any separate basis for a negligence claim against the employer, no coverage exists.”

The case stems from an altercation at a liquor store.  A customer claimed that he was punched in the face by a security guard while he was in the store.  The customer filed suit against the security guard, the store owner, and the store owner’s liability insurer, Auto-Owners.  The customer alleged the store owner was negligent in training and supervising the security guard.

Auto-Owners defended the store owner under a reservation of rights and sought a declaratory judgment as to insurance coverage.  The circuit court held that no coverage existed for the customer’s negligent supervision claim.  The store owner appealed, and the court of appeals reversed in a split decision.  The court of appeals held that a reasonable insured would expect coverage for the negligent supervision claim.  The supreme court granted further review and reversed, reinstating the circuit court’s decision in favor of Auto-Owners.

The supreme court began its analysis by reiterating that under Wisconsin law “it is the act that caused the harm that is important in determining whether the insurance policy provides coverage.  If the act that caused the harm was not an accident, then there was no occurrence to trigger coverage.”   The court then went on to state that when “analyzing whether a claim of negligent supervision is covered under an insurance policy, courts must compare the specific facts alleged against the employer with the language of the insurance policy to ascertain whether the incident or injury that gave rise to the claim satisfies the definition of occurrence.”  Since no specific separate acts by the store owner were alleged to have cause the customer’s injuries, the court held that the customer’s allegations against the store owner did not trigger coverage under the store owner’s liability policy.

The supreme court summed up its decision as follows:

We reverse the decision of the court of appeals and hold that there is no coverage under the Auto-Owners insurance policy.  This policy applies only to bodily injury caused by an “occurrence,” which is defined as an accident.  Intentionally punching someone in the face two times is not an accident under any definition.  Accordingly, the negligent supervision claim against [the store owner] can qualify as an occurrence only if facts exist showing that [the store owner’s] own conduct accidentally caused [the customer’s] injuries.  Because there are no facts in [the customer’s] complaint (or in any extrinsic evidence) alleging any specific separate acts by [the store owner] that caused [the customer’s] injuries, there is no occurrence triggering coverage for the negligent supervision claim.  The only specific assertion [the customer] made in this regard is that [the store owner] should have trained [the security guard] not to hit people.  We hold that when a negligent supervision claim is based entirely on an allegation that an employer should have trained an employee not to intentionally punch a customer in the face, no coverage exists.

The supreme court did recognize that coverage may exist for a negligent supervision claim if a plaintiff alleges facts independent from the intentional act giving rise to the injury.  As an example of a case in which such a claim may trigger insurance coverage, the court cited Vandenberg v. Cont’l Ins. Co., 2001 WI 85, 244 Wis. 2d 802, 628 N.W.2d 876, a case in which the court held that coverage existed for a daycare provider’s negligent supervision of her child, who placed pillows on top of a sleeping infant that caused infant to suffocate.  The court also cited QBE Ins. Corp. v. M & S Landis Corp., 915 A.2d 1222 (Pa. Super. 2007), a case in which the court held that an insurer had a duty to defend a nightclub against a claim that the night club negligently trained its bouncer employees on how to safely evict unruly patrons and render first aid.  Admittedly, the facts of these cases, and particularly the QBE Ins. case, are not as easily distinguishable from the facts of Talley as the supreme court’s holding seems to suggest.

As a collateral issue, the store owner apparently agreed with Auto-Owners’ coverage assessment, and Auto-Owners’ argued that neither the customer nor the court should be able to contest that agreement.  The supreme court rejected Auto-Owners’ position and declined to adopt a bright line rule that when the insured and insurer agree that an insurance policy does not provide coverage, their agreement controls the coverage determination.

Three Justices dissented and would have held that Auto-Owners’ policy provided coverage for the customer’s negligent supervision claim against the store owner.  In two dissents, the three Justices in the minority challenge the majority’s opinion in two respects.  First, they contend that the majority improperly analyzed the case from the standpoint of the security guard rather than the store owner, the insured.  In other words, the court should have instead focused on the store owner’s alleged negligent failure to properly supervise and train its security guard.

Second, they contend that the majority impermissibly relied on the perceived weakness of the customer’s negligent supervision claim to determine that the store owner’s insurance policy did not provide coverage for that claim.  They contend that the court should have instead focused on whether coverage was required by the language of the policy, assuming the customer’s claims were successful.

While notable, the significance of the Talley may be limited by its facts.  The majority clearly took issue with the customer’s attempt to creatively plead a covered claim against the store owner and based its decision principally on deficiencies in the customer’s complaint.  As a result, the case might have come out differently had the customer alleged specific facts separate from the assault and battery in support of its claim against the store owner.

If you have questions regarding the Wisconsin Supreme Court’s decision or any other insurance-coverage issues, please contact Dale O. ThornsjoLance D. Meyer, or one of the other members of our Firm’s Insurance Coverage Practice Group at (952.831.6544).