Wisconsin Supreme Court Clarifies Pecuniary Loss Recoverable Under the Lemon Law
Tammi v. Porsche Cars North America, Inc., ___N.W.2d ___, 2009 WL 2105355, 2009 WI 83
The Wisconsin Lemon Law, Wis. Stat. § 218.0171, is a consumer protection statute designed to reduce the inconvenience to consumers who purchase or lease a vehicle that turns out to be a “lemon,” and to improve vehicle manufacturers’ quality control. The statute provides that after a consumer reports a vehicle nonconformity, the vehicle manufacturer has an obligation to repair the nonconformity. A failure by the manufacturer to repair the nonconformity is a violation of this obligation. Wis. Stat. § 218.0171(7) allows a consumer to “bring an action to recover for any damages caused by a violation of this section.” A consumer who prevails in such action shall be awarded “twice the amount of any pecuniary loss, together with costs, disbursements and reasonable attorney fees, and any equitable relief the court determines appropriate.”
The Wisconsin Supreme Court in Tammi v. Porsche Cars North America, Inc., 2009 WI 83, acknowledged that there are limitations to the penalties that may be imposed upon manufacturers for violations of the Lemon Law and clarified what constitutes pecuniary loss recoverable under Wis. Stat. § 218.0171(7). The case involved the following four certified questions from the U.S. Court of Appeals for the Seventh Circuit regarding damages:
(1) When a consumer defined in Wisconsin Statute Section 218.0171(1)(b)4 brings an action pursuant to subsection (7), if that consumer, after making his Lemon Law demand, then exercises an option to purchase and buys the vehicle as provided in the lease, is the consumer then entitled to recover the amount of the purchase price?
(2) If the consumer defined in Wisconsin Statute Section 218.0171(1)(b)4 is entitled to recover the vehicle purchase price when he exercises the purchase option provided in the lease, does the purchase amount qualify as pecuniary loss subject to the doubling provision in subsection (7)?
(3) If the answers to questions 1 and 2 are in the affirmative, is the consumer permitted to keep the purchased vehicle in addition to the receipt of the damage award or must the vehicle be returned to the manufacturer?
(4) Is a damage award under subsection (7) subject to a reduction for reasonable use of the vehicle?
In response to certified question one, the court answered “no,” holding that when a consumer who leases a motor vehicle brings an action against the manufacturer pursuant to Wis. Stat. § 218.0171(7), and then exercises an option to purchase that vehicle under the lease agreement, he or she is not entitled to damages for the price of the voluntary purchase because the purchase was not “caused” by any violation of the statute by the manufacturer. The Court found it unnecessary to address the second and third certified questions.
In response to certified question four, the Court answered “yes,” concluding that the amount of pecuniary loss under Wis. Stat. § 218.0171(7) must incorporate a reasonable allowance for use before the pecuniary loss is doubled. The Court reasoned that the statute, read as a whole, clearly sets forth a reduction for reasonable use of the vehicle.
The Wisconsin Supreme Court’s decision was based on a rather unique set of facts involving both a lease and a subsequent purchase of a vehicle that had been deemed a lemon. In October 2004, Bruce Tammi sued Porsche Cars North America, Inc. alleging a violation of the Wisconsin Lemon Law. Tammi alleged that a rear spoiler on his leased 2003 Porsche 911 Turbo was defective and that the defect was not repaired after four attempts by certified Porsche repair centers. After filing his Lemon Law suit, Tammi decided to purchase the vehicle prior to the end of his 36-month lease term. Tammi sought pecuniary loss damages for his monthly lease payments and the amount he paid to purchase the car, among other things. In August 2006, a jury in the federal district court found that the defective spoiler was a nonconformity and awarded Tammi $26,600 for “pecuniary loss” caused by it. The district court altered the verdict on damages and awarded Tammi $266,159.76 ― twice the amount of both Tammi’s actual lease payments and the amount of the purchase price. Additionally, the district court rejected Porsche’s argument that damages should be offset by a reasonable allowance for use, and allowed Tammi to retain the vehicle.
The Wisconsin Supreme Court, in addressing the certified questions, held that the consumer may recover as his pecuniary loss double the financial obligations under the lease. The Court acknowledged that a lessee’s financial obligations are less than those of a purchaser of a vehicle. A lessee may walk away at the end of the lease term, whereas the purchaser is fully obligated to pay for the vehicle in full. The court reasoned that a consumer’s damages “caused” by a manufacturer’s violation of the statute amount to the consumer’s total financial obligation under the lease, not the actual lease payments that were made. As far as the vehicle purchase, while Tammi had the option to buy the automobile, he was not obligated or required to do so. Tammi’s subsequent purchase was voluntary and not “caused” by the manufacturer’s violation of the statute.
The Court also held that the statute clearly allows for “a reasonable allowance for use.” It reasoned that disregarding the “reasonable allowance for use” is not a penalty contemplated by the Lemon Law.
For further information, please contact Jeffrey S. Fertl, Melissa J. Lauritch or your regular Hinshaw attorney.
Wisconsin Supreme Court Renders Landmark Decision on the Availability of Insurance Coverage for Long-Term Toxic Exposure Cases*
Plastics Engineering Co. v. Liberty Mut. Ins. Co., 315 Wis.2d 556, 759 N.W.2d 613 (2009)
*This article previously appeared in the May 14, 2009 issue of Hinshaw's Toxic Tort Alert.
The Wisconsin Supreme Court recently rendered a decision that will have a significant impact on the availability and amount of insurance coverage afforded to policyholders in long-term toxic exposure cases, such as asbestos personal injury claims. The Court addressed the following three issues certified from the United States Court of Appeals for the Seventh Circuit: (1) what constitutes an ”occurrence” in an insurance contract when exposure injuries are sustained by numerous individuals, at varying geographical locations, over many years; (2) whether Wisconsin Statute Section 631.43(1) applies to successive insurance policies; and (3) whether Wisconsin courts would adopt an “all sums” or “pro rata” allocation approach to determining liability when an injury spans multiple, successive insurance policies.
The underlying personal injury claims were typical of those normally encountered by a company with a history of manufacturing or distributing asbestos containing products. Plastics Engineering (Plenco), manufactured and sold certain products containing asbestos from approximately 1950-1983. It was consequently sued in numerous asbestos personal injury lawsuits by individuals claiming long-term exposure to Plenco’s products. The exposures occurred at different times and at different locations. During the exposure periods, the insurer, Liberty, provided general liability coverage to Plenco. The policy terms differed and as a result, Plenco had products coverage for its asbestos exposure for some of the years of exposure. In other years the Liberty policies, due to Plenco’s business decision not to purchase products coverage or policy exclusions, did not provide coverage. Depending on the year of coverage, the policies had different occurrence and aggregate limits.
Addressing issue (1) as detailed above, the Court concluded that under the language of the insurance policy and the facts of the case, each claimant’s repeated exposure to asbestos fiber was one occurrence. This ruling is important for policyholders faced with numerous claims involving asbestos exposures during the same policy year. Because policy limits apply to each occurrence, each individual claim would be covered up to the occurrence limit, subject to the aggregate limit of the policy. For example, assume AAsbest Co. is faced with three separate personal injury claims involving exposure to asbestos fiber that occurred in 1976. Its liability policy for that year had $1 million per occurrence limits and $2 million aggregate. Pursuant to the Court’s holding, AAsbest Co. has coverage up to $1 million for each claim subject to total coverage for all three claims up to the $2 million aggregate limit. As Wisconsin law provides for a continuous trigger in long-term exposure cases, the amount of coverage available for each claim is compounded by the occurrence limits provided by each policy in force during the period each claimant was exposed to the policyholder’s product.
Liberty, like many insurers, attempted to limit the impact of the continuous trigger by including non-cumulation provisions in their primary and excess policies. These provisions clearly limit an insurer’s coverage to a single occurrence limit where an injury occurs over successive policy terms of policies issued by the same insurer. Plenco contended that those provisions were prohibited by Wisconsin’s other insurance statute, Wisconsin Statute Section 631.43.(1). The Court disagreed, holding that that statute did not apply to successive insurance policies. This holding becomes significant only where a policyholder purchases insurance from the same insurer over multiple policy terms. Non-cumulation provisions generally do not apply to policies issued by different insurers.
Finally, and most importantly, the Supreme Court adopted what is commonly referred to the “all sums” approach in addressing the allocation issue. The “allocation” issue involves the determination of how an insured’s liability for damages because of bodily injury that occurs over an extended period of time should be allocated among multiple triggered insurance policies and periods of no insurance. The Court concluded that once a policy is triggered, the insurer must fully defend the lawsuit in its entirety. Under the triggered policy, an insurer is responsible for "all sums," up to the policy limits, even where the compensation is for asbestos exposure that occurs "partly before and partly within the policy period."
The impact for policyholders of the “all sums” approach adopted by the Supreme Court is illustrated by Plenco’s historical insurance purchases. In several years, Plenco decided not to purchase product liability coverage for its asbestos containing products. Although the majority of a particular claimant’s exposure history occurred during the period of no coverage, as long as that individual also established exposure to Plenco’s asbestos-containing product during one day of a covered year, Plenco would be entitled to a complete defense and indemnity up to the occurrence policy limit of the triggered policy. The same rule applies under circumstances where policy limits in particular years are exhausted by the payment of similar claims or are otherwise no longer available due to lost policies or insurer insolvencies. As long as the policyholder can establish a claimant’s exposure during a covered policy year, the subject insurance policy must provide a defense and indemnity.
Because this case involved a single insurer, the Supreme Court did not address the issue of whether an insurer whose policy has been triggered has contribution rights for defense and indemnity costs paid against other insurers whose coverage has also been triggered by exposure during their respective policy periods. It is likely that the Court will allow insurers contribution relief against another insurer under these circumstances.
Although Plastics Engineering involved asbestos, its rational will apply to any long-term toxic exposure personal injury case. Policyholders faced with these types of claims need to carefully document and establish the periods of each claimant’s exposure in order to maximize their available insurance coverage. For further information, please contact Craig T. Liljestrand, Thomas R. Schrimpf or your regular Hinshaw attorney.
This newsletter has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. |