State justices to decide if punitive damages were excessive

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A land title company socked with a $1 million punitive damages jury award now will get a chance to convince the Wisconsin Supreme Court that the award was excessive and should be reduced.

Robert L. Kimble v. Land Concepts Inc. and First American Title et al. was filed before the 2011 Wisconsin caps on punitive damages took effect. In the case, a Door County jury awarded a $1 million punitive award against First American Title. The award was more than 33 times the post-trial reduced compensatory damages award of $29,738.49.

Although Wisconsin law, prior to 2011, lacked a hard cap on punitive damages, the $1 million judgment was reduced because of an earlier general rule of thumb that punitive damage awards be no greater than 10 times the amount of compensatory damages.

Case history

When Robert Kimble and his wife, Judith, in 2008 put their Nasewaupee vacation home up for sale for $1.3 million, instead of getting strong offers leading to a quick sale, their realtor received a cautionary letter saying the property had no legal access to the north, south, east or west.

Upon further investigation, the Kimbles found that the access road they relied on to enter and leave their Door County home was part of a land title mess. The couple sued the title company, a neighbor and three previous owners to straighten everything out.

The trial court found that First American Title wrongfully denied title insurance coverage, amid allegations that Assistant Vice President Donald Schenker provided misleading information to the Kimbles and their attorney early on in the process, and failed to give them a copy of a key deed.

In October 2012, the appellate court found no reason to reverse the trial court’s decision.

If First American had conducted a thorough investigation of the facts and circumstances, the appellate court ruled, and “reasonably concluded that the claim was fairly debatable or questionable,” then denial of the Kimble’s claim for title insurance coverage might not have been in bad faith.

But that was not the case, according to the trial court jury, which found that First American and its employees had misrepresented facts regarding access to the Kimble property, and concealed an important deed that was unfavorable to First American’s position.

The Kimbles purchased the property in 2004 from Dorene Dempster and Mark Herrell, who earlier purchased the property from John and Jane Stevenson. When the Stevenson’s sold the property to Dempster and Herrell, they had kept a subdivided north lot, only selling the recently divided south lot.

A warranty deed filed in 1989 when the Stevensons’ first came into title referenced an easement “in the use of a private road” along the west boundary of both properties, which was warranted by the seller when the lot was sold to Dempster and Herrell, who then sold the property to the Kimbles.

Curiously, on the same day that the Stevensons purchased their property from the original owners, an adjacent landowner, Land Concepts Inc. recorded an easement directly addressing the access issue that would later become a problem for the Kimbles.

The easement from Land Concepts granted “to the Estate of Gertrude P. Anderson, deceased, an access easement across its land to (the nearest public highway), which was located approximately 150 feet west of the private drive.”

When the Stevensons later divided their original land purchase into two lots, the southerly lot was landlocked and relied on access by a road which had been in use for years, the assumed basis for the ongoing easement.

When the Kimbles bought the property in 2004, they purchased a title insurance policy from First American Title. The language of that policy became key in both the lower and appellate court decision against the title company, which insured the Kimbles against “loss or damage … sustained or incurred by the insurer by reason of unmarketability of the title … or lack of a right of access to and from the land.”

In a March 2008 letter sent to the Kimbles’ realtor by Robert Johnson, an owner of Land Concepts, Johnson asserted that their property lacked an enforceable access way from any direction.

Further review showed there were technical issues with the 1989 easement from Land Concepts. The grantee information to the Estate of Gertrude Anderson was incorrect, and any subsequent sale of the Kimble property had to be approved by Land Concepts for the easement to continue, which had not been done.

Consequently, the First American Title policy language defining “Unmarketability of Title” was also central to the trial and appellate courts.

After the Kimbles notified First American of the title claim, First American denied coverage was triggered, saying that the Kimbles still had access to the property, even if a threat against continuing access had been made.

Settlements and trial

Less than a year later, the Kimbles sued First American Title for breach of contract and the Stevensons, Dempster and Herrell for breach of warranty.

The Kimbles settled with all parties except for First American, and assigned their bad faith denial claim to the Stevensons as part of the settlement.

In a preliminary one-day hearing outside of the presence of the jury, the trial court found: the Kimbles did lack a right of access, which made their property unmarketable; title policy coverage had been triggered; and the Kimbles could assign their litigation rights to a bad faith claim to the Stevensons.

The jury returned with a verdict in favor of the Stevensons for compensatory damages of $50,000 and punitive damages for bad faith coverage denial of $1 million.

Post-trial motions knocked the Stevensons’ compensatory damages from $50,000 to $29,738.49, but Door County Judge Todd Ehlers found the jury had a sufficient basis to sustain the $1 million punitive damages award against the title company.

On appeal, First American again contended that its insurance coverage had not been triggered, and that the Kimbles were not denied access to their property.

But like the trial court, the appellate court found that any assertion by First American that the Kimbles had access was not persuasive. The court pointed to First American’s assertion that Idlewild Woods Drive provided reasonable access for the Kimbles, when in fact it stopped 35 feet short of their property line.

Also, the appellate court agreed that First American had admitted in an earlier trial court hearing that there was no western access to the property, and could not deny now what it had already acknowledged as true.

The title company again asked the appellate court to undo the jury verdict answer, which found First American had acted in bad faith when it denied coverage to the Kimbles.

The appellate court explained that the evidentiary threshold to undo a jury answer is very high. To change the jury answer upon review, it needed to find “no credible evidence to sustain a finding in favor of such a party,” as noted in Wis. Stat. Sect. 805.14(1).

If there was any credible evidence to support the jury verdict, the appellate court explained, the award would stand.

The appellate court also had little sympathy for First American’s assertion that the $1 million dollar punitive damages award was excessive.

Although the appellate court opinion carefully described the legal framework and caselaw for both the state and federal Constitution’s 14th Amendment concerns about the size of punitive damage awards, First American’s arguments on the issue “were not sufficiently developed,” and the court upheld the verdict.

The state Supreme Court this coming term will take up the issue of whether the $1 million punitive damages award violated the Wisconsin Constitution or the common law of Wisconsin.