When a barn in rural Dane County halfway collapsed during a storm in 2013, killing cows and damaging property, everyone knew it was going to cost a lot to repair the damage.
But who should ultimately be responsible for paying the tab: the contractors whose faulty workmanship had allowed the barn to collapse or the private company that had insured the structure?
That’s one of the questions posed by a dispute the Wisconsin Supreme Court is scheduled to hear next year. The case arises from a construction contract that Jim Herman, a farmer in Dane County’s village of Marshall, entered in 2009 with the Minnesota contractor Lester Buildings LLC. The contract called on Lester Buildings to design a barn and build it on his property, work that was completed in 2010.
Three years later, half of the barn was knocked down in a storm, killing or fatally injuring several cows kept inside. Payments for the damage were made under an insurance policy that Herman’s company, Jim Herman Inc., had on the barn with Rural Mutual Co. Rural Mutual ultimately paid out more than $650,000 to repair the barn and compensate Herman for the cows that had died and other property damage.
To recover that money, Rural Mutual filed a lawsuit in 2014 against Lester Buildings and its insurer, as well as the Waldo-based company Van Wycks, which had been hired to pour the barn’s foundation and footings. In its suit, Rural Mutual alleged the barn had collapsed because steel rebar cages used in its structure had been installed several inches below the places called for in Lester Buildings’ designs. Rural Mutual contended, among other things, that Lester’s failure to put those components in the proper places had constituted a breach of its construction contract with Herman.
Lester Buildings responded by filing a complaint against Rural Mutual and bringing Herman into the lawsuit as a third-party defendant. Herman, in turn, filed cross-claims against Van Wycks’ insurer, West Bend Mutual Insurance Company, for costs such as lost revenue and lost profits on sales.
Lester Buildings, Van Wycks and West Bend all contended that a subrogation waiver provision in Lester Buildings’ construction contract with Herman should bar Rural Mutual from pursuing its claims. Such provisions, when found in a contract, generally prevent insurance companies from suing other parties to the same contract. In this particular case, West Bend also contended that the subrogation waiver barred Herman’s cross-claims for various damages.
In 2016, the case went before Dane Couny Circuit Court Judge Maryann Sumi, who sided with Lester Buildings, Van Wyck and West Bend. Rural Mutual and Herman next turned to the Wisconsin Court of Appeals but to no avail. A subsequent motion for reconsideration was denied by the court in May.
Appealing to the Wisconsin Supreme Court, Rural Mutual was able to get its review request approved in August. The high court was originally to take up the case on Jan. 19 but has had to postpone because of a scheduling conflict.
Rural Mutual is now contending that the court of appeals failed to properly interpret Wis. Stat. 895.447, which prevents parties to construction contracts from limiting or eliminating tort liability in their agreements. Rural Mutual specifically argued that that statute voids the subrogation waiver found in the construction contract between Lester Building and Jim Herman. Rural Mutual is also contending that subrogation waivers are unenforceable because they are not consistent with public policy.
Rural Mutual is represented by Monte Weiss of the Mequon firm Weiss Law Office. Lester Buildings is represented by the Milwaukee firm Wilson Elser Moskowitz Edelman & Dicker. West Bend Mutual is represented by the Racine attorney Jeffrey Leavell. And Van Wyks is represented by the Waukesha firm McCoy Leavitt Lasky.Follow @erikastrebel