Case Title: Trinity Evangelical Lutheran Church and School-Freistadt v. Tower Insurance Company

Citation: 2003 WI 46

Docket Number: 2001AP001201

State: wisconsin

Court: Wisconsin Supreme Court

Date: 2003-05-23T00:00:00Z

Document:
2003 WI 46 
 
 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
01-1201 
 
 
COMPLETE TITLE: 
 
 
Trinity Evangelical Lutheran Church and School-
Freistadt,  
 
Plaintiff-Respondent-Cross Petitioner, 
 
v. 
Tower Insurance Company,  
 
Defendant-Appellant-Petitioner. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2002 WI App 46 
Reported at:  251 Wis. 2d 212, 641 N.W.2d 504 
(Ct. App.-Published) 
 
 
OPINION FILED: 
May 23, 2003   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
December 4, 2002   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Waukesha   
 
JUDGE: 
Donald J. Hassin   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
PROSSER, J., dissents (opinion filed). 
SYKES, J., dissents (opinion filed). 
WILCOX and PROSSER, JJ., join dissent.   
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the defendant-appellant-petitioner there were briefs by 
M. Christine Cowles, Barbara A. O'Brien, and Borgelt, Powell, 
Peterson & Frauen, S.C., Milwaukee, and Edward M. Crane, Charles 
F. Smith, and Skadden, Arps, Slate, Meagher & Flom, Chicago, 
Illinois, and oral argument by Charles F. Smith. 
 
For the plaintiff-respondent-cross petitioner there were 
briefs by Merrick R. Domnitz, Robert L. Jaskulski, and Domnitz, 
Mawicke & Goisman, S.C., Milwaukee, and oral argument by Robert 
L. Jaskulski and Merrick R. Domnitz. 
 
An amicus curiae brief was filed by William C. Gleisner, 
III, Madison, and R. George Burnett and Liebmann, Conway, 
 
 
2
Olejniczak & Jerry, S.C., Green Bay, on behalf of the Wisconsin 
Academy of Trial Lawyers. 
 
An amicus curiae brief was filed by John W. Markson and 
Bell Gierhart & Moore, S.C., Madison, on behalf of the Civil 
Trial Counsel of Wisconsin. 
 
2003 WI 46 
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  01-1201  
(L.C. No. 
98-CV-0108) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Trinity Evangelical Lutheran Church and  
School-Freistadt,  
 
          Plaintiff-Respondent- 
          Cross Petitioner, 
 
     v. 
 
Tower Insurance Company,  
 
          Defendant-Appellant-Petitioner. 
 
FILED 
 
MAY 23, 2003 
 
Cornelia G. Clark 
Clerk of Supreme Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Reversed in 
part and affirmed in part.   
 
¶1 
N. 
PATRICK 
CROOKS, 
J.   This 
case 
involves 
an 
insurance action where, as a result of mistake, the insurance 
policy failed to provide hired and non-owned automobile coverage 
that the insured requested.  After Tower Insurance Company 
(Tower) learned of the mistake, it failed in its duty to its 
insured, 
Trinity 
Evangelical 
Lutheran 
Church 
and 
School-
Freistadt 
(Trinity) 
to 
investigate 
properly 
and 
evaluate 
reasonably.  It initially refused to backdate coverage when the 
error was discovered after an accident occurred.  The pivotal 
No. 
01-1201   
 
2 
 
dispute in this case centers on what Tower should have done once 
it became aware of the mistake.  
¶2 
The circuit court, the Honorable Marianne E. Becker 
presiding, determined that Trinity was entitled to reformation 
of the insurance policy as a matter of law.  The circuit court 
further concluded that Tower's conduct constituted bad faith 
under the standard set forth in Anderson v. Continental 
Insurance Co., 85 Wis. 2d 675, 691, 271 N.W.2d 368 (1978), and 
accordingly granted summary judgment to Trinity pursuant to Wis. 
Stat. § 802.08(6) (1999-2000).1  A jury trial was then held on 
the issue of damages, and $3,500,000 in punitive damages were 
awarded to Trinity.  Tower's motions after verdict were denied, 
and judgment was entered on the verdict on March 15, 2001.   
¶3 
The court of appeals upheld the punitive damages award 
of $3,500,000 by applying a de novo standard of review and a 
"gross excessiveness test."  The decision by the court of 
appeals was made contingent on a trial with a finding of bad 
faith.  The court of appeals found that there were genuine 
issues of material fact on the claim of bad faith, and therefore 
it reversed the circuit court's grant of summary judgment on 
that claim.  
¶4 
Two issues must be resolved.  First, whether the court 
of appeals was correct in reversing summary judgment on the bad 
faith claim, and second, what standard of review should be 
                                                 
1 All subsequent references to the Wisconsin Statutes are to 
the 1999-2000 version unless otherwise indicated. 
No. 
01-1201   
 
3 
 
applied when an appellate court reviews a jury's punitive 
damages award.  We must also determine, applying the relevant 
factors, whether the jury award of $3,500,000 in punitive 
damages should be upheld.  
¶5 
We conclude that the circuit court properly granted 
summary judgment on the issue of bad faith.  We also hold that 
the appropriate standard of review to be applied in reviewing a 
punitive damage award is de novo review, and that when the 
relevant factors are considered, the punitive damages award 
should be allowed to stand.  Therefore, we reverse, in part, the 
court of appeals' decision on the grant of summary judgment, but 
we affirm its decision upholding the award of punitive damages.   
 
I.  FACTS 
¶6 
Trinity Evangelical Church and School (Trinity) offers 
religious services as well as a grade school to approximately 
234 grade school age children in Mequon, Wisconsin.  In 1994, 
Trinity was interested in renewing its hired and non-owned 
automobile insurance coverage that it carried, because its 
teachers had occasion to transport students to and from certain 
functions in the course of their employment using their own 
vehicles. 
¶7 
Trinity 
sought 
renewal 
quotations 
from 
various 
carriers including Tower Insurance Company (Tower) who was 
represented by their agent Jim Rodrian (Rodrian). Trinity 
explained to Rodrian its need for hired and non-owned coverage.  
Rodrian then passed this information on to Harold Fischer 
No. 
01-1201   
 
4 
 
(Fischer), an underwriter at Tower.  Fischer gave Rodrian a 
quote, which Rodrian believed included the requested coverage, 
and Rodrian subsequently provided the quote to Trinity, who 
accepted it, believing it would be covered for hired and non-
owned automobiles. 
¶8 
On February 10, 1994, Rodrian sent Trinity's pre-
application binder, which included information on this requested 
form of coverage.  However, Rodrian inadvertently failed to 
check the hired and non-owned box on Trinity's insurance 
application.  Tower issued the policy without any of the parties 
involved being aware of the omission of the requested coverage. 
¶9 
On January 24, 1995, Lorrie Erdman, a teacher at 
Trinity, while transporting students from the school in the 
course of her employment, using her own vehicle, ran a stop sign 
and collided with another vehicle.  The collision resulted in 
serious injuries to the other vehicle's driver and passenger. 
¶10 Trinity notified Rodrian of the potential claim.  Upon 
review of the policy, Rodrian discovered his omission.  Rodrian 
drafted a letter to Carol Blackwell (Blackwell), a district 
manager in Tower's underwriting department, dated January 31, 
1995, informing Tower of the accident and of the fact that he 
mistakenly failed to request hired and non-owned automobile 
coverage on the application.  Rodrian also requested that Tower 
backdate Trinity's coverage. 
¶11  In response to Rodrian's letter, Blackwell drafted a 
memo to Gene Gallagher, the vice president and director of 
operations 
at 
Tower. 
 
Blackwell's 
memo 
summarized 
the 
No. 
01-1201   
 
5 
 
circumstances 
surrounding 
Rodrian's 
error, 
and 
asked 
for 
direction as to how to handle Rodrian's request to backdate 
coverage. 
¶12  Within twenty-four to forty-eight hours, Gallagher 
instructed Blackwell to inform Rodrian that Tower would not 
backdate Trinity's coverage.2   
¶13 Gallagher sent a handwritten note to Blackwell, which 
describes his decision: 
Carol—Your referral says that this is agency error and 
not ours.  We didn't get request to provide [hired and 
non-owned coverage] didn't get copy of binder till 
now, so [we] don't have any reason to backdate.  
Suggest agent [Jim Rodrian] alert his E and O carrier 
if he hasn't already.  I'm not going to put backdate 
and add with uncertainty as to possible exposure.  We 
could be facing big dollars due to liab[ility]?? If 
you want to discuss further let me know.  Gene 
On February 2, 1995, Blackwell met with Rodrian to inform him of 
Tower's decision not to backdate coverage. 
¶14 Thereafter, Tower was asked on several occasions to 
reconsider its position.  One request for reconsideration came 
from Jim Reynolds, the adjuster for Rodrian's Errors and 
Omissions (E & O) carrier.  This letter, mailed to Gallagher, 
included a citation to Trible v. Tower Insurance Co., 43 Wis. 2d 
                                                 
2 It is Trinity's position that Gallagher did nothing to 
investigate Tower's duty to Trinity before making his decision, 
and that this non-investigation, among other things, constituted 
bad faith on Tower's part.  Trinity points out that Gallagher 
made his decision without ever contacting Tower's in-house 
attorney for advice on the matter, and without ever contacting 
Trinity to verify Rodrian's representation. 
No. 
01-1201   
 
6 
 
172, 168 N.W.2d 148 (1969).3  Gallagher did not read the case, 
and Tower did not change its decision. 
 
II.  PROCEDURAL BACKGROUND 
¶15 A suit arising out of the accident was filed in 1998.  
On May 18, 1998, Tower filed a motion for summary judgment 
asking to be dismissed as a party in the case.  This motion was 
based solely on language of the written policy, and the motion 
failed to bring to the court's attention that Tower had been 
informed by its agent that the written policy was in error.  
Specifically, Tower failed to inform the court in its motion 
that its agent had requested the policy to be backdated and that 
Tower had denied the agent's request.   
¶16 In response to Tower's motion for summary judgment, 
Trinity hired an attorney to represent it on the question of 
insurance coverage, and filed a cross-claim for reformation and 
                                                 
3 Trible is the seminal case in Wisconsin addressing the 
obligation of an insurer to reform an insurance contract upon 
the discovery of a mutual mistake in the issuance of the written 
policy.  The facts of Trible are nearly identical to the facts 
presented to Tower at the time it denied coverage to Trinity.  
Trible involved an insurance agent tied to an insurer via an 
agency contract.  There was an error in requesting coverage, 
thereby creating a "mutual mistake" (see note 4), and the 
insurer later discovered that the insured had, in fact, 
requested the coverage.  This court in Trible concluded that 
reformation of the erroneous insurance policy was appropriate.  
It is also important to note that Tower was the defendant in 
Trible v. Tower Insurance Co., 43 Wis. 2d 172, 168 N.W.2d 148 
(1969). 
No. 
01-1201   
 
7 
 
breach of contract.  Shortly thereafter, Tower withdrew its 
motion for summary judgment. 
¶17 On September 28, 1998, Trinity deposed Fischer, the 
Tower underwriter who dealt with the insurance agent, Rodrian, 
in regard to Trinity's policy.  During Fischer's deposition, 
Trinity discovered that in June 1995, four months after 
Blackwell had met with Rodrian to inform him of Tower's 
decision, an investigator hired by Rodrian had tracked down 
Fischer and obtained a signed statement from him.  The statement 
made it clear that Rodrian had indeed asked Fischer to include 
hired and non-owned automobile coverage in Trinity's policy.  
¶18 Two days later, Tower stipulated to reform Trinity's 
policy to include non-owned and hired coverage at the time of 
the accident.  Tower also paid approximately $490,000 to 
discharge Trinity's liability in its entirety in the underlying 
accident suit.  Trinity subsequently amended its cross-claim to 
assert a bad faith cause of action against Tower.   
¶19  In response, Tower filed a motion for summary judgment 
seeking dismissal of the bad faith claim.  In a written 
decision, the Circuit Court of Waukesha County, Honorable 
Marianne E. Becker presiding, held that Trinity was entitled to 
reformation of the insurance policy as a matter of law. The 
circuit 
court 
additionally 
found 
that 
Tower's 
conduct 
constituted bad faith under the standard set forth in Anderson 
v. Continental Insurance Co., 85 Wis. 2d 675, 691, 271 N.W.2d 
368 (1978), and accordingly granted summary judgment for Trinity 
pursuant to Wis. Stat. § 802.08(6).   
No. 
01-1201   
 
8 
 
¶20 Following the circuit court's decision, the only 
factual issue left for determination by a jury was whether 
punitive damages should be awarded.  After several days of 
testimony, including testimony from Gallagher that he had no 
knowledge of principal/agency law, the law of reformation, 
Wisconsin's Unfair Claims Practices Act, or the Trible case, the 
jury determined that Tower had acted "in an intentional 
disregard of the rights of the plaintiff" awarding $3,500,000 in 
punitive damages to Trinity.   
¶21 Tower's motions after verdict were denied and judgment 
was entered on the verdict on March 15, 2001.  Tower appealed. 
¶22 The court of appeals upheld the punitive damages award 
of $3,500,000 by applying a de novo standard of review and a 
"gross excessiveness test."  This decision by the court was made 
contingent on a trial with a finding of bad faith.  The court of 
appeals held that the circuit court erred in granting summary 
judgment on the bad faith claim. 
¶23 Tower petitioned for review on the punitive damages 
award, and Trinity cross-petitioned on the bad faith claim.  
Review was granted on September 3, 2002. 
¶24 As previously noted, this court must determine whether 
the court of appeals was correct in reversing the grant of 
summary judgment on the bad faith claim, and what standard of 
review should be applied when an appellate court reviews a 
punitive damages award.  
¶25  When reviewing a grant of summary judgment, the 
appellate court applies the same standards set forth in 
No. 
01-1201   
 
9 
 
Wis. Stat. § 802.08 as the circuit court applies.  Voss v. City 
of Middleton, 162 Wis. 2d 737, 748, 470 N.W.2d 625 (1991).   
¶26 It is argued by Tower and by Trinity that when 
reviewing a circuit court's decision regarding a punitive 
damages award, the appellate court should apply a de novo 
standard.  Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 
532 U.S. 424, 435-36 (2001); BMW of N. Am., Inc. v Gore, 517 
U.S. 559 (1996).  
¶27 Tower argues that the appellate court erred in 
upholding a punitive damages award that was premised on a bad 
faith finding that was later reversed.  In support of its 
position, Tower maintains that the bifurcation of the bad faith 
issue and the punitive damages issue prejudices Tower and runs 
counter to established practice in Wisconsin.  In addition, 
Tower argues that the appellate court erred in upholding a 
grossly excessive punitive damages award. 
¶28 Trinity, on the other hand, asks this court to affirm 
the circuit court's decision granting summary judgment on the 
bad faith issue.  Trinity argues that the circuit court properly 
analyzed and applied Wisconsin's bad faith law.  However, 
Trinity asks that this court affirm the court of appeals' 
decision upholding the punitive damages award.  Trinity argues 
that upon a de novo review of the facts of this case, it is 
clear that the punitive damages award is not in violation of due 
process, nor is it excessive. 
III.  BAD FAITH CLAIM 
No. 
01-1201   
 
10 
 
¶29 First, we turn to the question of whether the circuit 
court properly granted summary judgment on the claim of bad 
faith.  We hold that, based on the facts of this case, only one 
reasonable inference can be drawn——Tower acted with bad faith 
toward its insured, Trinity.  Consequently, we reverse the court 
of appeals' decision that reversed the grant of summary judgment 
on that claim.  
¶30  As noted above, when reviewing a grant of summary 
judgment, we apply the standards set forth in Wis. Stat. 
§ 802.08.  Robinson v. City of West Allis, 2000 WI 126, ¶26, 239 
Wis. 2d 595, 619 N.W.2d 692; Voss, 162 Wis. 2d at 748.  
¶31 Under Wis. Stat. § 802.08(2), summary judgment must be 
entered 
"if 
the 
pleadings, 
depositions, 
answers 
to 
interrogatories, and admissions on file, together with the 
affidavits, if any, show that there is no genuine issue as to 
any material fact and that the moving party is entitled to a 
judgment as a matter of law."     
¶32 Therefore, the first step in the summary judgment 
review analysis is to determine whether the pleadings set forth 
a claim of relief.  Grams v. Boss, 97 Wis. 2d 332, 338, 294 
N.W.2d 473 (1980).  Next, if the pleadings meet this initial 
test, and our review of the record shows that the moving party 
has made a prima facie case for summary judgment, we examine the 
record to determine whether there "exist[s] disputed material 
facts, or undisputed material facts from which reasonable 
alternative inferences may be drawn, sufficient to entitle the 
opposing party to a trial."  Id.  
No. 
01-1201   
 
11 
 
¶33 Anderson sets forth the elements of bad faith.  
Anderson, 85 Wis. 2d at 691.  First, an insured must show 
absence of a reasonable basis for denying policy benefits.  
Mowry v. Badger State Mut. Cas. Co., 129 Wis. 2d 496, 516, 385 
N.W.2d 171 (1986).  Absence of a reasonable basis for denying a 
claim exists when the claim is not "fairly debatable."  Id.  The 
"fairly debatable" test requires a claim to be investigated 
properly and the results of that investigation to be subject to 
reasonable evaluation and review.  Anderson, 85 Wis. 2d at 692.   
¶34 According to Anderson, an insured must show "the 
absence of a reasonable basis for denying benefits of the 
policy" and the insurer's "knowledge or reckless disregard of 
the lack of a reasonable basis for denying the claim."  Id. at 
691.  "[B]ad faith is the absence of honest, intelligent action 
or consideration based upon a knowledge of the facts and 
circumstances upon which a decision in respect to liability is 
predicated."  Id. at 692.  There is a duty of ordinary care and 
reasonable diligence on the part of an insurer in handling 
claims, and it must exercise an honest and informed judgment.  
Id.  We agree with the court of appeals:  "In short, it is 
proper when applying the bad faith test to determine whether a 
claim was properly investigated and whether the results of the 
investigation were subjected to a reasonable evaluation and 
review."  See Trinity Evangelical Lutheran Church v. Tower Ins. 
Co., 2002 WI App 46, ¶27, 251 Wis. 2d 212, 641 N.W.2d 504.  
¶35 Applying the above rules to the facts of this case, 
the pleadings of Trinity set forth a claim for relief.  
No. 
01-1201   
 
12 
 
¶36 The 
court 
of 
appeals 
reviewed 
the 
record 
and 
determined that genuine issues of material fact were in dispute, 
making summary judgment on the bad faith claim inappropriate.  
Trinity, 251 Wis. 2d at 233.  Specifically, the court said: "the 
facts related to what Tower actually knew and thus whether there 
was an intentional disregard are in dispute."  Id. (emphasis 
added).    
¶37 We disagree with the decision of the court of appeals.  
First, contrary to the test set forth by the court of appeals, 
Trinity was not required to make a showing of intentional 
disregard in order to succeed on a claim of bad faith.  The 
appropriate test, as noted above, is whether the insurer acted 
with "knowledge or reckless disregard of the lack of a 
reasonable 
basis 
for 
denying 
the 
claim." 
 
Anderson, 
85 
Wis. 2d at 691.  While we note that Anderson does say that:  
"Bad faith by definition cannot be unintentional."  The court of 
appeals, however, appears to have conflated the "intentional 
disregard" standard required for punitive damages, with the 
"knowledge or reckless disregard" standard required for bad 
faith.  See id.   
¶38 Second, upon an independent review of the record, we 
conclude that the record in this case clearly indicates that the 
facts regarding what Tower knew were not in dispute at the time 
of the granting of summary judgment.  While there may be some 
factual disputes, those disputes do not involve genuine issues 
of material fact.  Indeed, the undisputed material facts in this 
case lead to only one reasonable inference——an inference of bad 
No. 
01-1201   
 
13 
 
faith on the part of Tower.  The Anderson court stated that "the 
knowledge of the lack of a reasonable basis may be inferred and 
imputed to an insurance company where there is a reckless 
disregard of a lack of a reasonable basis for denial or a 
reckless indifference to facts or to proofs submitted by the 
insured."  Anderson, 85 Wis. 2d at 693. 
¶39 This case centers on what Tower should have done when 
it learned its agent made a mistake that adversely affected its 
insured, Trinity.  Tower was put on notice by this court over 30 
years ago, when it was the defendant in a nearly identical fact 
situation.  Trible, 43 Wis. 2d 172.  In this present case, Tower 
was reminded of that prior decision, but denied coverage 
nonetheless. 
¶40 The following undisputed material facts illustrate 
Tower's reckless disregard toward its insured, Trinity.  First, 
the record indicates that Tower, through its prior involvement 
as the defendant in the Trible case, should have understood its 
obligation to provide the requested coverage to an insured such 
as Trinity, where a mutual mistake has occurred.4  Second, the 
                                                 
4 It can be argued here that the mistake was unilateral 
rather than mutual given there was no error or mistake on the 
part of Trinity.  Black's Law Dictionary defines a unilateral 
mistake as one-sided; relating to only one of two or more 
persons or things.  Black's Law Dictionary, 1532 (7th ed. 1999). 
No. 
01-1201   
 
14 
 
record indicates without dispute that Trinity lacked coverage 
due to a mutual mistake attributable to Tower's agent, Rodrian.  
The court of appeals recognized this undisputed fact.  See 
Trinity, 251 Wis. 2d 212, ¶9.  
¶41 Next, it is undisputed, and recognized by the court of 
appeals, that Tower, via Gallagher, knew of this mutual mistake 
when it denied coverage to Trinity.  See id. (citing to letter 
to Blackwell).  Finally, there is no dispute that Trinity 
requested that its coverage be backdated, and the court of 
appeals recognized this undisputed fact.  See id.   
¶42 It is clear that Tower, knowing of the mutual mistake, 
failed to take "honest, intelligent action or consideration 
based upon knowledge of the facts and circumstances" presented 
to it when it denied coverage to Trinity.  See Anderson, 85 
Wis. 2d at 692.  Tower also failed to take such action or 
consideration when it failed to inform the court of Rodrian's 
error and his request for backdating.  As a result, Tower failed 
to act in conformity with its duties.     
                                                                                                                                                             
However, the court in Trible and the circuit court and 
court of appeals in Trinity consistently refer to the "mistake" 
described here and in Trible as being a mutual mistake.  For 
example, the court in Trible said:  "When a policy of insurance 
is involved, mutual mistake is proven when the party applying 
for insurance proves that he made certain statements to the 
agent concerning the coverage desired, but the policy as issued 
does not provide the coverage desired." 
Trible v. Tower Ins. Co., 43 Wis. 2d 172, 182, 168 N.W.2d 148 
(1969); See also, Trinity Evangelical Lutheran Church v. Tower 
Ins. Co., 2002 WI App 46, ¶26, 251 Wis. 2d 212, 641 N.W.2d 504. 
No. 
01-1201   
 
15 
 
¶43 In light of the undisputed material facts set forth 
herein, we conclude that the only reasonable inference that can 
be drawn is that Tower acted in bad faith.  As a result, we 
agree 
with 
the 
circuit 
court 
that 
summary 
judgment 
was 
appropriate here, and reverse the court of appeals' decision in 
that regard.   
 
IV.  PUNITIVE DAMAGES AND THE STANDARD OF REVIEW 
¶44 We now turn to the issue of the punitive damages 
award.  Tower argues that the appellate court erred in upholding 
a grossly excessive punitive damages award of $3,500,000 in 
violation of due process constraints.  We disagree, and affirm 
the decision of the court of appeals upholding that award by the 
jury.  
¶45 Proof of a bad faith claim does not necessarily make 
the award of punitive damages appropriate.  Anderson, 85 
Wis. 2d at 697.  The intent necessary to maintain an action for 
bad faith is distinct from what must be shown to recover 
punitive damages.  Id.; see also Wis. Stat. § 895.85 (3).  The 
factors necessary for an award of punitive damages, require a 
showing of: (1) evil intent deserving of punishment or of 
something in the nature of special ill-will; or (2) wanton 
No. 
01-1201   
 
16 
 
disregard 
of 
duty; 
or 
(3) 
gross 
or 
outrageous 
conduct.  
Anderson, 85 Wis. 2d at 697l5 
                                                 
5 While the Anderson test is phrased somewhat differently 
than the standard jury instruction that was given on punitive 
damages, the jury instruction adequately covered the factors 
that the jury should have considered here.  That instruction was 
as follows: 
Punitive damages may be awarded, if you find that the 
defendant acted in an intentional disregard of the 
rights of the plaintiff. 
A person acts in an intentional disregard of the 
rights of the plaintiff if the person acts with a 
purpose to disregard the plaintiff's rights, or is 
aware that his or her acts are practically certain to 
result in the plaintiff's rights being disregarded. 
The purpose of punitive damages is to punish a 
wrongdoer or deter the wrongdoer and others from 
engaging in similar conduct in the future. Punitive 
damages are not awarded to compensate the plaintiff 
for any loss he or she has sustained.  A plaintiff is 
not entitled to punitive damages as a matter of right.  
Even if you find that the defendant acted in an 
intentional disregard of the plaintiff's rights, you 
do not have to award punitive damages.  Such damages 
may be awarded or withheld at your discretion. 
If you determine that punitive damages should be 
awarded, 
you 
may 
then 
award 
such 
sum 
as 
will 
accomplish the purpose of punishing or deterring 
wrongful conduct.  
Factors you should consider in answering this question 
include: 
1. 
The grievousness of the defendant's acts,  
2. 
The potential damage which might have been done 
by such acts as well as the actual damage, and  
3. 
The defendant's ability to pay.  You may consider 
the defendant's wealth in determining what sum of 
punitive damages will be enough to punish the 
No. 
01-1201   
 
17 
 
¶46 Punitive damages may properly be imposed to further a 
state's legitimate interests in punishing unlawful conduct and 
deterring its repetition.  BMW, 517 U.S. at 568.  According to 
Wisconsin law, the award of punitive damages in a particular 
case is within the discretion of the jury, and "[w]e are 
reluctant to set aside an award merely because it is large or we 
would have awarded less."  Jacque v. Steenberg Homes, Inc., 209 
Wis. 2d 605, 626, 563 N.W.2d 154 (1997).   
¶47 In Cooper Industries, Inc. v. Leatherman Tool Group, 
Inc., 532 U.S. 424 (2001), the United States Supreme Court held 
that the Ninth Circuit Court of Appeals erred in applying the 
less 
demanding 
abuse-of-discretion 
standard 
when 
reviewing 
district court determinations of the constitutionality of an 
award of punitive damages.  Instead, the United States Supreme 
Court determined that the constitutional issue of punitive 
damages merits de novo review.  Cooper, 532 U.S. at 431.  In 
reaching that conclusion, the Court said that the precise 
meaning of concepts like "gross excessiveness" is a fluid 
concept "that take their substantive content from the particular 
context[] in which the standard[] is being assessed."  Id. at 
436.  The Court went on to say: 
"Independent 
review 
is 
therefore 
necessary 
if 
appellate courts are to maintain control of, and 
clarify, the legal principles."  Again, this is also 
true of the general criteria set forth in Gore; they 
will acquire more meaningful content through case-by-
case application at the appellate level.  "Finally, de 
                                                                                                                                                             
defendant and deter the defendant and others from 
the same conduct in the future. 
No. 
01-1201   
 
18 
 
novo review tends to unify precedent" and "'stabilize 
the law.'" . . . Justice Breyer made a similar point 
in his concurring opinion in Gore: 
"Requiring the application of law, rather than a 
decisionmaker's caprice, does more than simply provide 
citizens notice of what actions may subject them to 
punishment; it also helps to assure the uniform 
treatment of similarly situated persons that is the 
essence of law itself."   
Id.  
¶48 Similarly, 
in 
Wisconsin, 
in 
Management 
Computer 
Services, this court held, in determining whether a jury's award 
was excessive, that the reviewing court properly reviewed the 
entire record "ab inito" or "de novo," placing no weight on the 
circuit court's conclusions.  See Management Computer Servs. v. 
Hawkins, Ash, Baptie & Co., 206 Wis. 2d 158, 192 n.32, 557 
N.W.2d 67 (1996).  We reached that conclusion because the 
circuit court set forth conclusory reasons for reducing a jury's 
punitive damages award of $1,750,000 to $650,000, and failed to 
analyze the evidence or set forth its own reasons for ordering 
remittitur 
with particularity.  While 
Management Computer 
Services is a case involving remittitur, and therefore factually 
distinguishable, we nevertheless apply the reasons set forth in 
Cooper and extend the de novo review rule in Management Computer 
Services to apply to all situations, remittitur or otherwise, 
where there is a review of a punitive damages award.  Therefore, 
building upon and extending the rule in Management Computer 
Services, we hold that a de novo standard of review is 
appropriate when reviewing a circuit court's determination of 
the constitutionality of punitive damages awards. 
No. 
01-1201   
 
19 
 
¶49 Although de novo review is the appropriate standard of 
review, we nevertheless acknowledge that the Due Process Clause 
of the Fourteenth Amendment imposes substantive limits on the 
size of a punitive damages award.  Management Computer Servs., 
206 Wis. 2d at 193.  See also Cooper, 532 U.S. at 433.   
¶50 An award is excessive, and therefore violates due 
process, if it is more than necessary to serve the purposes of 
punitive damages, or inflicts a penalty or burden on the 
defendant 
that 
is 
disproportionate 
to 
the 
wrongdoing.  
Management Computer Servs., 206 Wis. 2d at 193 (citing Tucker v. 
Marcus, 142 Wis. 2d 425, 446, 418 N.W.2d 818 (1988); Wangen v. 
Ford Motor Co., 97 Wis. 2d 260, 303, 294 N.W.2d 437 (1980); 
Fahrenberg v. Tengle, 96 Wis. 2d 211, 234, 291 N.W.2d 516 
(1980)).  As noted by this court in previous decisions, the 
purpose of punitive damages is to punish the wrongdoer, and to 
deter the wrongdoer and others from similar conduct, rather than 
to compensate the plaintiff for any loss.  Id. (citing Wangen, 
97 Wis. 2d at 303; Malco v. Midwest Aluminum Sales, Inc., 14 
Wis. 2d 57, 64, 109 N.W.2d 516 (1961)).  See also Cooper at 432 
(citing Gertz v. Robert Welch, Inc., 418 U.S. 323, 350 (1974)).  
¶51 In Jacque, we reiterated the decision of the United 
States Supreme Court in TXO, and held that only when an award 
can be fairly categorized as "grossly excessive," in relation to 
the state's interests in punishment and deterrence, does it 
enter the zone of arbitrariness that violates due process.  
Jacque, 209 Wis. 2d at 627 (citing TXO Prod. Corp. v. Alliance 
Res. Corp., 509 U.S. 443, 454 (1993)).  Furthermore, the test 
No. 
01-1201   
 
20 
 
for "grossly excessive[ness]" stems from a basic notion of 
fairness that a party should receive fair notice, not only of 
the conduct that will subject it to punishment, but also of the 
severity of the penalty that a state may impose.  BMW, 517 U.S. 
at 574; Jacque, 209 Wis. 2d at 627.   
¶52 Accordingly, in 
determining 
whether 
an 
award of 
punitive damages is excessive, the United States Supreme Court 
has applied a three-part test.  The test asks the reviewing 
court 
to 
weigh: 
 
(1) 
the 
degree 
of 
egregiousness 
or 
reprehensibility of the conduct; (2) the disparity between the 
harm or the potential harm suffered and the punitive damages 
award; and (3) the difference between the punitive damages and 
the possible civil or criminal penalties imposed for the 
conduct.  BMW, 517 U.S. at 575; State Farm Mut. Auto. Ins. Co. 
v. Campbell, 538 U.S. ___, 123 S. Ct. 1513 (2003).6   
                                                 
6 In a recent opinion, the United States Supreme Court 
reiterated the three-prong test of Gore and said: 
[W]e instructed courts reviewing punitive damages to 
consider 
three 
guideposts: 
(1) 
the 
degree 
of 
reprehensibility of the defendant's misconduct; (2) 
the disparity between the actual or potential harm 
suffered by the plaintiff and the punitive damages 
award; and (3) the difference between the punitive 
damages awarded by the jury and the civil penalties 
authorized or imposed in comparable cases.  We 
reiterated the importance of these three guideposts in 
Cooper Industries and mandated appellate courts to 
conduct de novo review of a trial court's application 
of them to the jury's award.  Exacting appellate 
review ensures that an award of punitive damages is 
based upon an 'application of law, rather than a 
decisionmaker's caprice.'  
No. 
01-1201   
 
21 
 
¶53 When applying a virtually identical test, Wisconsin 
courts have been encouraged to consider, from the following, 
those factors which are most relevant to the case, in order to 
determine whether a punitive damages award is excessive: 
1. 
The grievousness of the acts;  
2. 
The degree of malicious intent; 
3. 
Whether the award bears a reasonable relationship 
to the award of compensatory damages;  
4. 
The potential damage that might have been caused 
by the acts;  
5. 
The ratio of the award to civil or criminal 
penalties that could be imposed for comparable 
misconduct, and 
6. 
The wealth of the wrongdoer.   
Management Computer Servs., 206 Wis. 2d at 194 (citing BMW, 116 
S. Ct. at 1598-60; Tucker, 142 Wis. 2d at 446-47; Brown v. 
Maxey, 124 Wis. 2d 438, 439, 369 N.W.2d 677 (1985); Wangen, 97 
Wis. 2d at 302; Dalton v. Meister, 52 Wis. 2d 173, 180-81, 188 
N.W.2d 494 (1971), cert. denied, 405 U.S. 934 (1972); Malco, 14 
Wis. 2d at 66).  
¶54 With the above rules in mind, we now turn to the facts 
of this case.  As an insurance company doing business in 
Wisconsin, Tower has an implied duty of good faith and fair 
dealing, and our law has developed such that this duty 
encompasses the obligation to investigate properly and evaluate 
                                                                                                                                                             
State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. ___, 123 
S. Ct. 1513 (2003).  
 
No. 
01-1201   
 
22 
 
reasonably disputed coverage claims.  Prosser v. Leuck,  225 
Wis. 2d 126, 138, 592 N.W.2d 178 (1999).  Here, the state has a 
legitimate interest in deterring insurance companies such as 
Tower from engaging in acts of bad faith.  Furthermore, the 
state has an interest in deterring Tower, and others, from 
ignoring applicable decisions of this court as to its duty to 
its insured, and then later claiming ignorance of what such a 
duty entails.  The $3,500,000 punitive damages award against 
Tower will serve the legitimate state interest in deterrence, as 
well as in punishment.  Consequently, the punitive damages award 
will send a message not only to Tower, but to other insurance 
companies as well, that ignoring its duties as an insurer is not 
acceptable and might very well result in substantial punitive 
damages.    
¶55 Since we have determined that the punitive damages 
award accomplishes the legitimate state interests of punishment 
and deterrence, we now weigh the factors set forth in BMW 
against these interests.  See Jacque, 209 Wis. 2d at 627.  
¶56 However, the evidence must be viewed in the light most 
favorable to the plaintiff, and a jury's punitive damages award 
will not be disturbed, unless the verdict is so clearly 
excessive as to indicate passion and prejudice.  Id. at 626-27.   
¶57 First, we analyze the degree of grievousness or 
reprehensibility involved.  As we declared in Jacque, "[t]he 
most important indicium of the reasonableness of a punitive 
damage 
award 
is 
the 
degree 
of 
reprehensibility 
of 
the 
defendant's conduct."  Jacque, 209 Wis. 2d at 628; see also BMW 
No. 
01-1201   
 
23 
 
517 U.S. at 576 n.23 (citing David G. Owen, A Punitive Damages 
Overview: Functions, Problems and Reform, 39 Vill. L. Rev. 363, 
387 (1994)) ("The flagrancy of the misconduct is thought to be 
the primary consideration in determining the amount of punitive 
damages.")  Id.  The grievousness or reprehensibility of Tower's 
conduct is clear from the record. Tower engaged in prohibited 
conduct while knowing or recklessly disregarding the lack of a 
reasonable basis for denying the claim.  This court told Tower 
more than 30 years ago about the duty of an insurer to reform an 
insurance policy upon a discovery of mutual mistake.  See Trible 
v. Tower Ins. Co., 43 Wis. 2d 172, 168 N.W.2d 148 (1969).  Not 
only was Tower told what to do in such a situation of mutual 
mistake, but Tower was reminded of this decision by Jim Reynolds 
in his letter.   
¶58 Recently, the United States Supreme Court reiterated 
the rules for punitive damages with regard to repeat offenders, 
or "recidivist[s]".  Campbell, 538 U.S. at ___.  The United 
States Supreme Court said: 
Although "[o]ur holdings that a recidivist may be 
punished more severely than a first offender recognize 
that repeated misconduct is more reprehensible than an 
individual instance of malfeasance," Gore, supra, at 
577, in the context of civil actions courts must 
ensure the conduct in question replicates the prior 
transgressions.  TXO, 509 U.S. at 462 n. 28 (noting 
that courts should look to "'the existence and 
frequency of similar past conduct'")(quoting Haslip, 
499 U.S. at 21-2).  
Id.  
No. 
01-1201   
 
24 
 
¶59 Tower disregarded the law and its duty to an insured 
like Trinity not once—but twice.  Such repeated disregard for 
the law and its duty indeed seems egregious and reprehensible.   
See BMW, 517 U.S. at 576-77; Jacque, 209 Wis. 2d at 628.  In 
viewing the evidence according to the rules set forth in Jacque 
and Campbell, the bad faith in this case involved Tower's 
intentional disregard of its duty to investigate diligently to 
ascertain and evaluate the facts and circumstances underlying 
the issuance of the policy and the accident, in order to arrive 
at a good faith decision.  See Prosser, 225 Wis. 2d at 138.   
¶60 As stated previously, Gallagher, as the representative 
of Tower, made a series of decisions that illustrate bad faith 
on behalf of Tower.  These acts of bad faith also buttress a 
determination of the egregiousness of Tower's conduct.  The 
record indicates that Tower, through its prior involvement as 
the defendant in the Trible case, should have understood its 
obligation to provide coverage to Trinity where clearly a mutual 
mistake had occurred.  As noted in Campbell, recidivists, or 
repeat offenders, may be punished more severely, in that their 
conduct is viewed to be more "reprehensible than an individual 
instance of malfeasance."  Campbell, 538 U.S. at ___. 
¶61 Trinity lacked coverage due to a mutual mistake 
attributable to Tower's agent, Rodrian.  The court of appeals 
recognized this.  See Trinity, 251 Wis. 2d 212.  Furthermore, it 
is undisputed, and recognized by the court of appeals and the 
circuit court, that Tower, through Gallagher, knew of this 
mutual mistake when it denied coverage to Trinity.  See id., ¶9 
No. 
01-1201   
 
25 
 
(citing to letter to Blackwell).  There is no dispute that 
Trinity requested backdated coverage.  See id.   
¶62 In addition to the undisputed material facts, it is 
important to note that the record indicates that Gallagher, on 
behalf of Tower, made the decision to deny coverage without 
investigating Rodrian's requests for backdating, and without 
seeking available in-house legal counsel.  Not only did 
Gallagher, on behalf of Tower, fail to investigate the situation 
properly, but the record reveals that Gallagher failed to 
contact Fischer, Tower's own underwriter, with whom Rodrian 
worked on the Trinity policy, about whether he understood 
Trinity 
to 
have 
requested 
hired 
and 
non-owned 
coverage.  
Furthermore, Tower decided to ask for summary judgment without 
informing the court of the dispute regarding Rodrian's error, 
and the request for backdating.  These decisions, acts, and 
omissions on the part of Gallagher, on behalf of Tower, 
illustrate a continuing, egregious, and flagrant pattern of 
disregard toward Tower's duty owed to its insured, Trinity.  As 
a 
result, 
we 
conclude 
that 
the 
egregiousness 
and 
reprehensibility factor has been met under the BMW test.  
¶63 Next, we measure the disparity between the harm or 
potential harm suffered by Trinity and the punitive damages 
award.  Jacque, 209 Wis. 2d at 628-29.  When compensatory 
damages are awarded, the reviewing court is to consider whether 
the award bears a reasonable relationship to the award of 
compensatory 
damages, 
and 
to 
possible 
civil 
or 
criminal 
penalties.  Id. at 629.  Compensatory damages represent the 
No. 
01-1201   
 
26 
 
actual harm inflicted on the plaintiff.  Id.  Wisconsin law 
expressly rejects the use of a fixed multiplier, either a fixed 
ratio of compensatory to punitive damages or of civil or 
criminal penalties to punitive damages, to calculate the amount 
of reasonable punitive damages.  Management Computer Servs., 206 
Wis. 2d at 194.  Accord Cooper, 532 U.S. at 434, and BMW, 517 
U.S. at 582.  However, we have held that in the appropriate 
case, a comparison of the compensatory damages and the punitive 
damages award is important.  Jacque, 209 Wis. 2d at 629.7   
¶64 With regard to the second guidepost, the disparity of 
harm or potential harm and the punitive damages award, the 
United States Supreme Court recently held: 
Nonetheless, because there are no rigid benchmarks 
that a punitive damages award may not surpass, ratios 
greater than those we have previously upheld may 
comport 
with 
due 
process 
where 
"a 
particularly 
egregious act has resulted in only a small amount of 
economic damages."  Ibid., see also ibid. (positing 
that a higher ratio might be necessary where "the 
injury is hard to detect or the monetary value of 
noneconomic 
harm 
might 
have 
been 
difficult 
to 
determine").  The converse is also true, however.  
When compensatory damages are substantial, then a 
lesser ratio, perhaps only equal to compensatory 
damages, can reach the outermost limit of the due 
process guarantee.  The precise award in any case, of 
course, must be based upon the facts and circumstances 
of the defendant's conduct and the harm to the 
plaintiff.   
Campbell, 538 U.S. at ___.  
                                                 
7 At trial, the attorney for Trinity claimed that Tower's 
alleged bad faith actions exposed Trinity to $490,000 in 
potential harm.  
No. 
01-1201   
 
27 
 
¶65 The facts and circumstances of Tower's conduct and 
Trinity's harm are clear.  At trial, both parties were given the 
opportunity to introduce evidence and argue on this issue.  
Tower introduced evidence that the only potential damage in this 
case was $17,000; Trinity introduced evidence of a harm of 
$490,000 had Tower succeeded on its motion for summary judgment.  
The punitive damages award represents a 7:1 ratio of punitive 
damages to compensatory damages, if Trinity's position is 
applied. 
¶66 Finally, under the BMW test, we engage in a comparison 
of the punitive damages award and the civil or criminal 
penalties that could be imposed for comparable misconduct.  
Jacque, 209 Wis. 2d at 630.  As noted by the United States 
Supreme Court: 
The third guidepost in Gore is the disparity between 
the punitive damages award and the "civil penalties 
authorized or imposed in comparable cases."  We note 
that, in the past, we have also looked to criminal 
penalties that could be imposed.  The existence of a 
criminal penalty does have bearing on the seriousness 
with which a State views the wrongful action.  When 
used to determine the dollar amount of the award, 
however, the criminal penalty has less utility. 
Campbell, 538 U.S. at ___.  
¶67 The court of appeals found this factor "largely 
irrelevant" to the case at hand.  See id.  In reaching that 
conclusion, the court of appeals said that:  
[t]he legislature has not put into place a criminal or 
civil statute prohibiting insurance carriers from 
intentionally disregarding the contractual rights of 
an insured and rejecting claims on the basis of their 
own economic self-interest.  Thus, as our supreme 
No. 
01-1201   
 
28 
 
court held in Jacque, when a legislature has not 
prescribed penalties for the type of conduct engaged 
in by the defendant, this third guidepost becomes 
immaterial.   
Trinity Evangelical Lutheran Church v. Tower Ins. Co., 2002 WI 
App 46, ¶41, 251 Wis. 2d 212, 641 N.W.2d 504.   
¶68 However, the legislature has provided a criminal 
penalty, including a fine of up to $10,000, for any violation of 
"any 
insurance 
statute 
or 
rule 
of 
this 
state." 
Wis. Stat. § 601.64(4). 
 
The 
Wisconsin 
Administrative 
Code 
contains 
insurance 
rules 
that 
prohibit 
unfair 
settlement 
practices, including the "[f]ailure to attempt in good faith to 
effectuate fair and equitable settlement of claims submitted in 
which liability has become reasonably clear."  Wis. Admin. Code 
§ Ins. 6.11 (3)(a)(4) (Jan., 2002).   In this case, as noted 
previously, a 7:1 ratio results if Trinity's position on 
compensatory damages is accepted.  Furthermore, as noted above, 
a criminal penalty has "less utility" when used to determine the 
dollar amount of the punitive damages award.  Campbell, 538 U.S. 
at ___.  
 
¶69 The factors discussed are the ones most relevant in 
this case.  As noted previously, there are other factors that 
may be relevant given the nature of the case at hand.  See 
Management Computer Servs., 206 Wis. 2d at 194.  Defendant's 
wealth is oftentimes a significant factor.  In this case, the 
evidence presented to the jury through the testimony of 
No. 
01-1201   
 
29 
 
Trinity's expert, Robert Niendorf, appears sufficient to justify 
the size of the punitive damages award.8  
V.  CONCLUSION 
¶70 In summary, we conclude that the circuit court 
properly granted summary judgment on the issue of Tower's bad 
faith.  No other reasonable inference can be drawn from the 
facts presented.  Therefore, we reverse the court of appeals' 
decision in part.  We also hold that the appropriate standard to 
                                                 
8 Over Tower's objections and motion to bar Niendorf's 
testimony, the circuit court admitted Niendorf's conclusion that 
Tower is able to pay a punitive damages award in one of three 
ways:  by liquidating its assets (at the end of 1999, the 
Company had a net worth of $24,600,000); by drawing on insurance 
reserves, or "retained earnings," for a sum of approximately 
$15,000,000; 
or 
by 
restructuring 
its 
debt-equity 
ratio, 
allegedly yielding $18,700,000.  Tower objected to the above 
evidence claiming that Niendorf's analysis improperly aggregated 
the financial position of Tower and its parent company, Atlas 
Assurance Company of America (Atlas).  The circuit court 
redacted portions of Niendorf's testimony, but allowed Niendorf 
to testify to his conclusions.  
The court of appeals at paragraphs 31-32 in its opinion 
said: 
[F]or 
our 
purposes 
. 
. 
. 
contrary 
to 
Tower's 
assertion, 
Niendorf's 
testimony 
did 
not 
include 
improper 
information 
about 
Tower's 
parent 
company. . . .  It does not appear that Niendorf's 
theories regarding Tower's ability to pay relied on 
the financial well-being of Atlas.  And finally, each 
source of money listed as available to satisfy a 
punitive damages judgment was totally internal to the 
financial assets of Tower.  We hold that the process 
was untainted by Niendorf's testimony. 
Trinity, 251 Wis. 2d 212, ¶31-32.  
 
No. 
01-1201   
 
30 
 
be applied in reviewing a punitive damages award is a de novo 
review standard.  Applying that standard, and the factors most 
relevant in this case, we affirm the court of appeals decision 
upholding the award of punitive damages by the jury. 
By the Court.—The decision of the court of appeals is 
reversed in part and affirmed in part. 
No. 
01-1201   
 
 
 
1
 
No.  01-1201.dtp 
 
1 
 
¶71 DAVID T. PROSSER, J.   (dissenting).  Justice Sykes 
has written a compelling dissent.  It ably expresses several of 
my concerns, and I join it without reservation.  I write 
separately because, for me, this case raises disconcerting 
questions about the future of trial by jury in civil cases.   
¶72 The Wisconsin Constitution provides that: "The right 
of trial by jury shall remain inviolate, and shall extend to all 
cases at law without regard to the amount in controversy; but a 
jury trial may be waived by the parties in all cases in the 
manner prescribed by law."  Wis. Const. art. I, § 5. 
¶73 We have said repeatedly that the right to trial by 
jury preserved by the constitution is the right as it existed at 
the time of the adoption of the constitution in 1848.  Town of 
Burke v. City of Madison, 17 Wis. 2d 623, 635, 117 N.W.2d 580 
(1962); see also State v. Hansford, 219 Wis. 2d 226, 234-37, 580 
N.W.2d 171 (1998). 
¶74 Summary judgment did not exist as part of Wisconsin 
law in 1848.  There should thus be sensitivity to the impact of 
summary judgment on jury trials as summary judgment practice 
evolves. 
¶75 In the early part of the twentieth century there were 
numerous cases testing the compatibility of summary judgment 
with the right of trial by jury.  See Frank T. Boesel, Summary 
Judgment Procedure, 6 Wis. L. Rev. 5, 9-13 (1930).9  Most of the 
                                                 
9 Boesel begins his discussion with the following sentence: 
In New York the question of the constitutionality 
of this rule arose almost immediately after its 
adoption, and its validity was vigorously attacked.  
No.  01-1201.dtp 
 
2 
 
early 
cases 
upheld 
summary 
judgment 
procedure 
against 
constitutional attacks.  In Dwan v. Massarene, 192 N.Y.S. 577 
(N.Y. App. Div. 1922), for example, a New York court stated: 
 
The constitution provides (art. 1, sec. 2): "The 
trial by jury in all cases in which it has been 
heretofore used shall remain inviolate forever."  It 
secures the right to a jury trial of the issues of 
fact in those cases where it had been theretofore 
used.  This did not deprive the court of the power to 
determine whether there was an issue of fact to be 
tried; but if the court determined there was such an 
issue, it must be tried by a jury.  A false denial 
interposed for the purpose of delay did not create 
such an issue, any more than a false affirmative 
defense. 
Dwan, 192 N.Y.S. at 581, quoted in Boesel, supra note 1, at 9. 
¶76 In reviewing these early cases, one is struck by the 
caution with which courts addressed the constitutional issue.  
Courts defended summary judgment on the narrow grounds that 
judges should have the power to strike out sham or frivolous 
pleas, Eisele & King v. Raphael, 101 A. 200, 201 (N.J. 1917); 
Towne v. Dunn, 136 N.W. 562, 563 (Minn. 1912), and avoid 
unnecessary delay.  Summary judgment was less encompassing then 
than it is today; even so, judicial opinions usually voiced 
allegiance to the principle that juries should decide disputed 
facts and juries should pass on credibility. 
                                                                                                                                                             
It was earnestly contended that by applying this rule 
the defendant was deprived of his constitutional right 
to a trial by jury, as provided for by the New York 
Constitution. 
Frank T. Boesel, Summary Judgment Procedure, 6 Wis. L. Rev. 5, 9 
(1930). 
No.  01-1201.dtp 
 
3 
 
¶77 In his law review article advocating that Wisconsin 
adopt 
a 
summary 
judgment 
rule 
or 
statute, 
Frank 
Boesel 
acknowledged that "the ascertainment and determination of what 
is and what is not a real bona fide defense presents the most 
difficult 
problem 
in [summary judgment's] 
application and 
administration."  Boesel, supra note 1, at 17. 
Each case must, of course, be considered on its own 
particular facts and circumstances, and in disposing 
of each case presented to the court, little, if any, 
assistance will be derived from any attempts to apply 
general rules or principles.  It would appear, 
however, that if there is any doubt whatever in the 
mind of the court as to the existence of such a bona 
fide issue, it should be resolved in favor of the 
defendant, and the matter determined only after a 
hearing or trial in the regular order.  This is 
particularly 
true 
where 
a 
square 
question 
of 
credibility of witnesses arises . . . . 
Id.  
¶78 In Wisconsin there are many cases that describe 
summary judgment as "a drastic remedy."  For example, in Lecus 
v. Am. Mut. Ins. Co. of Boston, 81 Wis. 2d 183, 260 N.W.2d 241 
(1977), the court said: "We have often stated summary judgment 
is a drastic remedy and should not be granted unless the 
material facts are not in dispute, no competing inferences can 
arise, and the law that resolves the issue is clear.  Summary 
judgment is not to be a trial on affidavits and depositions."  
Id. at 189. 
¶79 As Justice Heffernan observed in Village of Fontana-
on-Geneva Lake v. Hoag, 57 Wis. 2d 209, 203 N.W.2d 680 (1973), 
"summary judgment is a drastic remedy which, if granted, 
deprives the parties of a trial."  Id. at 214.  His opinion went 
No.  01-1201.dtp 
 
4 
 
on to express concern about a litigant being "deprived of his 
constitutional right to try the issues of fact."  Id. 
¶80 The Lecus case stands for the additional proposition 
that the issue of intent is not one that properly can be decided 
on a motion for summary judgment, Lecus, 81 Wis. 2d at 190, and 
this principle is not dead.  Similarly, the court of appeals has 
stated that "Summary judgment should not be granted where the 
resolution of a dispositive issue depends on state of mind."  
Hudson Diesel v. Kenall, 194 Wis. 2d 531, 547, 535 N.W.2d 65 
(1995) (citing Gouger v. Hardtke, 167 Wis. 2d 504, 517, 482 
N.W.2d 84 (1992)). 
¶81 In the rush to move cases along, summary judgments can 
be abused.  Summary judgments will not be constitutionally 
suspect so long as courts faithfully limit them to situations in 
which material facts are not in dispute, intent and state of 
mind are not at issue, and the credibility of witnesses is not 
material.  As Justice Sykes clearly demonstrates, that is not 
the situation here. 
¶82 This is a tort case involving an insurer's alleged 
breach of duty of good faith in dealing with its insured.  See 
Wis JI——Civil 2761.  The plaintiff was required to prove, among 
other things, that there was no reasonable basis for the 
insurance company to deny its claim.  The case is more difficult 
than a traditional bad faith case because the policy issued by 
the insurance company did not contain hired and non-owned 
coverage, as the insured requested.  Hence, Tower must have 
grappled with questions of whether it had to reform its policy 
No.  01-1201.dtp 
 
5 
 
and had to pay damages, or whether liability would be assumed or 
shared by the negligent insurance agent's errors and omissions 
insurance carrier.   
¶83 Despite this situation, Circuit Judge Marianne Becker 
found every element of the tort of bad faith by the insurer to 
be beyond dispute.  Our court of appeals disagreed, but this 
court overrules the court of appeals' determination that 
material facts were in dispute and insists that no inferences 
helpful to the insurer could have been drawn from the facts.  
This is breathtaking.  Surely, we have come a long way from the 
days when this court said that on summary judgment a court does 
not try the issues but only decides whether there is an issue 
for trial.  Wis. Tel. v. Cent. Contracting, 254 Wis. 480, 483, 
37 N.W.2d 24 (1949). 
¶84 What the majority decision seems to ignore is that the 
tort of bad faith is inextricably linked to the punitive damages 
issue that went to the jury.  At trial, Tower Insurance was not 
able to defend itself on a level playing field.  The circuit 
court left handprints on the scales of justice by taking the bad 
faith issue from the jury and instructing the jury as to the 
defendant's bad faith.   
¶85 The plaintiff was a church, the defendant was an 
insurance 
company, 
and 
the 
judge 
was 
making 
official 
pronouncements about the defendant's bad faith.  Is there any 
wonder that the jury awarded $3,500,000 in punitive damages? 
No.  01-1201.dtp 
 
6 
 
¶86 This case may be precedent for generations to come.  
The procedure we ratify is wrong, even if the result can be 
defended. 
No.  01-1201.dss 
 
1 
 
¶87 DIANE S. SYKES, J.   (dissenting).  I respectfully 
dissent.  I agree with the court of appeals that the circuit 
court's sua sponte order granting summary judgment to Trinity on 
its bad faith claim was improper.  The tort of bad faith is an 
intentional tort.  Anderson v. Continental Ins. Co., 85 Wis. 2d 
675, 691, 271 N.W.2d 368 (1978).  "To show a claim for bad 
faith, a plaintiff 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."  Id. 
¶88  The tort of bad faith contains an objective and a 
subjective element.  Weiss v. United Fire & Cas. Co., 197 Wis. 
2d 365, 377, 541 N.W.2d 753 (1995).  The first element——the 
absence of a reasonable basis for denying the claim——is 
objective.  Id. at 378.  The second element——the defendant's 
knowledge or reckless disregard of the absence of a reasonable 
basis for denying the claim——is subjective.  Id. at 392.  The 
"subjective component can be inferred from a 'reckless disregard 
of a lack of a reasonable basis for denial or a reckless 
indifference to facts or to proofs submitted by the insured.'"  
Id. (quoting Anderson, 85 Wis. 2d at 693). 
¶89  Issues of subjective intent are generally not suitable 
for resolution on summary judgment.  Tri-Tech Corp. of America 
v. Americorp Serv., Inc., 2002 WI 88, ¶30 n.5, 254 Wis. 2d 418, 
646 N.W.2d 822.  "We have stated [that] the issue of . . . 
intent is not one that properly can be decided on a motion for 
summary judgment.  Credibility of a person with respect to his 
No.  01-1201.dss 
 
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subjective intent does not lend itself to be determined by 
affidavit."  Lecus v. American Mut. Ins. Co. of Boston, 81 Wis. 
2d 183, 190, 260 N.W.2d 241 (1977) (citing Doern v. Crawford, 30 
Wis. 2d 206, 214, 140 N.W.2d 193 (1966)); see also Green Spring 
Farms v. Spring Green Farms Assoc., 172 Wis. 2d 28, 41, 492 
N.W.2d 392 (Ct. App. 1992). 
¶90  Here, Tower moved for summary judgment on the bad 
faith claim, arguing that it had a reasonable basis to deny 
Trinity's coverage claim as a matter of law.  Trinity opposed 
the motion, arguing that there was no reasonable basis to deny 
the claim (because it was entitled to reformation of the policy) 
and that there were disputed issues of material fact regarding 
Tower's knowledge or reckless disregard, requiring a jury trial.  
The circuit court denied Tower's motion, but then, pursuant to 
Wis. Stat. § 802.08(6), sua sponte entered summary judgment for 
Trinity.  The parties eventually stipulated to compensatory 
damages in the amount of $17,570, representing the reasonable 
value of the attorneys' fees Trinity had incurred in proving up 
insurance coverage.  The case proceeded to trial on the issue of 
punitive damages only. 
¶91  The court of appeals concluded that summary judgment 
was inappropriate because "the facts related to what Tower 
actually knew and thus whether there was intentional disregard 
are in dispute."  Trinity Evangelical Lutheran Church v. Tower 
Ins. Co., 2002 WI App 46, ¶21, 251 Wis. 2d 212, 234, 641 N.W.2d 
504.  The majority correctly notes that this misstates the 
intent 
component 
of 
the 
bad 
faith 
tort, 
which 
requires 
No.  01-1201.dss 
 
3 
 
"knowledge or reckless disregard of the lack of a reasonable 
basis for denying the claim" rather than "intentional disregard" 
as stated by the court of appeals.  Anderson, 85 Wis. 2d at 691; 
majority op., ¶37.  However, later in its opinion, the court of 
appeals reframes the disputed issue as "whether the facts 
necessary to evaluate the claim were properly investigated and 
developed 
or 
recklessly 
ignored 
and 
disregarded," 
or 
alternatively, whether there was a "knowing failure to exercise 
an honest and informed judgment."  Id., ¶¶25, 27.  This 
correctly states the subjective intent component of the bad 
faith tort. 
¶92 Because issues of subjective intent are generally not 
amenable to resolution on summary judgment——particularly summary 
judgment entered sua sponte——I agree with the court of appeals 
that summary judgment on the bad faith claim was improperly 
granted.  The circuit court's written decision on summary 
judgment notes that "[Gene] Gallagher [Tower's vice president] 
testified that he did not actually know whether Trinity had 
requested non-owned and hired auto insurance." Decision on 
Motion for Summary Judgment, July 21, 1999, p. 7.  Nevertheless, 
the circuit court concluded that Gallagher's failure to contact 
the underwriter Fischer (who testified that he had actual 
knowledge), consult with legal counsel, or contact Trinity 
satisfied the subjective knowledge element of bad faith under 
Anderson.  Decision on Motion for Summary Judgment, p. 8. 
¶93  While the evidence cited by the circuit court strongly 
supports a finding of reckless disregard, Tower was entitled to 
No.  01-1201.dss 
 
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have a jury decide the matter after a trial rather than have the 
circuit court do so on the basis of a paper record.  Evaluating 
issues 
of 
knowledge 
or 
recklessness 
involves 
weighing 
credibility and drawing inferences, a task for a jury at trial, 
not a court on summary judgment.  Although it was not entitled 
to summary judgment in its favor on the objective element of the 
tort of bad faith (the absence of a reasonable basis to deny the 
claim), Tower was entitled to litigate at least the subjective 
element at a jury trial. 
¶94 This is especially true in light of the claim for 
punitive damages, which was tried on the basis of instructions 
that informed the jury that the court had determined "as a 
matter of law" and as a result of "undisputed material facts" 
that Tower had "acted in bad faith in denying coverage to 
Trinity because, A, Tower lacked a reasonable basis for denying 
coverage to Trinity . . . and, B, based on Tower's failure to 
conduct an adequate investigation of Trinity's claim for 
coverage, Tower recklessly failed to ascertain that coverage to 
Trinity . . . should have been provided."  As a result of the 
summary judgment, Tower was precluded from presenting evidence 
or argument that it was not guilty of bad faith——either the 
objective or the subjective components of the claim.  Instead, 
the jury was told that Tower's bad faith was an established 
matter, not open to dispute, and that it need only decide 
whether Trinity was entitled to punitive damages. 
¶95 Accordingly, I do not agree with the majority's 
decision to reverse the court of appeals and reinstate the 
No.  01-1201.dss 
 
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circuit court's grant of summary judgment.  I would affirm the 
court of appeals' decision to the extent that it reversed and 
remanded for trial on Trinity's bad faith claim. 
¶96 Although the court of appeals reversed the circuit 
court's order of summary judgment on the bad faith claim, it 
nevertheless upheld the jury's $3.5 million award of punitive 
damages.  The majority affirms this part of the court of 
appeals' opinion.  I do not agree. 
¶97 Any punitive damages claim is necessarily interwoven 
in the underlying determination of liability or fault.  This is 
particularly true in the intentional tort of bad faith, for 
which liability attaches only upon a determination of the 
defendant's knowing or reckless disregard of the rights of the 
plaintiff.  Here, the entry of summary judgment eliminated 
Tower's ability to present evidence that it did not possess the 
requisite level of intent to establish liability for the 
intentional tort upon which any award of punitive damages would 
necessarily be premised.  The starting point for the jury was 
the fact that Tower's bad faith had already been conclusively 
established.  The circuit court instructed the jury that bad 
faith and reckless disregard had been determined by the court as 
a matter of law on the basis of "undisputed material facts," 
which necessarily influenced the jury's consideration of the 
appropriateness and amount of punitive damages.  For this reason 
alone, I would reverse the award of punitive damages. 
¶98 In addition, however, the punitive damages award 
cannot 
withstand 
the 
due 
process 
test 
for 
excessiveness 
No.  01-1201.dss 
 
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established in BMW of North America v. Gore, 517 U.S. 559, 575 
(1996), which requires a reviewing court to evaluate, de novo, 
1) the degree of reprehensibility of the conduct; 2) the 
disparity or ratio between the punitive damages award and the 
harm or potential harm suffered; and 3) the difference between 
the punitive damages award and any civil or criminal penalties 
authorized for the conduct.10  See also Cooper Industries v. 
Leatherman Tool Group, 532 U.S. 424, 431 (2001). 
¶99 The United States Supreme Court has very recently 
reaffirmed the BMW test and the requirement of de novo review: 
"Exacting appellate review ensures that an award of punitive 
damages is based upon an 'application of law, rather than a 
decisionmaker's caprice.'"  State Farm Mut. Auto. Ins. Co. v. 
Campbell, 538 U.S. ___, 123 S.Ct. 1513, 1520-21 (2003), (citing 
Cooper Industries, 532 U.S. at 436, quoting in turn BMW, 517 
U.S. at 587 (Breyer, J., concurring)). 
¶100 Campbell, like this case, was a bad faith cause of 
action against an insurance company.  The issue was whether "an 
award 
of 
$145 
million 
in 
punitive 
damages, 
where 
full 
compensatory damages are $1 million, is excessive and in 
violation of the Due Process Clause of the Fourteenth Amendment 
                                                 
 
10  While the majority applies a de novo standard of review 
(as it must under Cooper Industries v. Leatherman Tool Group, 
532 U.S. 424 (2001)), it sows some potential for confusion by 
citing certain language from Jacque v. Steenberg Homes, Inc., 
209 Wis. 2d 605, 626, 563 N.W.2d 154 (1997): "[w]e are reluctant 
to set aside an award merely because it is large or we would 
have awarded less."  Majority op., ¶46.  De novo review requires 
independent evaluation by the reviewing court, which may indeed 
result in a substitution of the reviewing court's opinion for 
that of the jury, contrary to the quoted language in Jacque. 
  
No.  01-1201.dss 
 
7 
 
to the Constitution of the United States."  Id. at 1517.  The 
Supreme Court invalidated the $145 million punitive damages 
award, 
concluding 
that 
it 
"was 
neither 
reasonable 
nor 
proportionate to the wrong committed," and that it was "an 
irrational and arbitrary deprivation of the property of the 
defendant."  Id. at 1526.         
¶101 Under both BMW and the Supreme Court's recent decision 
in Campbell, de novo review of the degree of reprehensibility of 
the defendant's conduct depends in part on whether the conduct 
was violent, caused physical injury, or was "purely economic," 
and whether it involved "trickery and deceit" or something 
closer to mere negligence.  BMW, 517 U.S. at 575-76; Campbell, 
123 S.Ct. at 1521.  Exemplary or punitive damages "should 
reflect 'the enormity of [the] offense.'"  BMW at 575.  In 
Campbell, the Supreme Court elaborated: 
We 
have 
instructed 
courts 
to 
determine 
the 
reprehensibility 
of 
a 
defendant 
by 
considering 
whether: the harm caused was physical as opposed to 
economic; the tortious conduct evinced an indifference 
to or a reckless disregard of the health or safety of 
others; the target of the conduct had financial 
vulnerability; the conduct involved repeated actions 
or was an isolated incident; and the harm was the 
result of intentional malice, trickery, or deceit, or 
mere accident. . . . The existence of any one of these 
factors weighing in favor of a plaintiff may not be 
sufficient to sustain a punitive damages award; and 
the absence of all of them renders any award suspect. 
Campbell, 123 S.Ct. at 1521. 
¶102  None of these factors is present here.  The conduct 
at issue implicated economic injury only (insurance coverage), 
and, in fact, Trinity was never at risk of having no insurance 
No.  01-1201.dss 
 
8 
 
at all; either the agent's insurance carrier would provide 
coverage, or Tower would, depending upon the outcome of the 
coverage dispute.  Also, Tower provided legal counsel and a 
defense as soon as Trinity was sued, and ultimately stipulated 
to reformation and paid the underlying claim.  No one was 
physically injured; no one's health or safety was at risk.  Nor 
was there any financial vulnerability, for the reasons just 
noted.  There was no intentional malice, trickery, or deceit. 
¶103 The majority characterizes Tower as a "recidivist" for 
purposes of evaluating the reprehensibility of its conduct, 
citing the fact that Tower was the defendant in Trible v. Tower 
Ins. Co., 43 Wis. 2d 172, 168 N.W.2d 148 (1969).  Majority op., 
¶¶59-60.  By no stretch of the facts or imagination can Tower be 
considered a "recidivist" on the basis of Trible. 
¶104 In Trible, this court held that an insurance agency's 
mistake is attributable to the insurer under agency law, and 
that reformation is an appropriate remedy for mutual mistake in 
an application for insurance.  Trible, 43 Wis. 2d at 181-84.  
Yes, Tower was the defendant in Trible, but it was not a bad 
faith case; it was an action on an insurance contract, and in 
affirming the circuit court's reformation of the policy we noted 
that there had been a factual dispute on the issue of mistake, 
which had been resolved by the factfinder in favor of the 
insured.  Trible, 43 Wis. 2d at 180.  Contrary to the majority's 
assertions, then, majority op., ¶59, Trible did not hold that 
Tower had violated any duty, disregarded any law, or otherwise 
No.  01-1201.dss 
 
9 
 
committed bad faith against its insured.  Tower can hardly be 
considered a "repeat offender" on the basis of Trible. 
¶105 "[P]erhaps [the] most commonly cited indicium of an 
unreasonable or excessive punitive damages award is its ratio to 
the actual harm inflicted on the plaintiff."  BMW, 517 U.S. at 
580.  Punitive damages "must bear a 'reasonable relationship' to 
compensatory damages."  Id.  Here, $3.5 million in punitive 
damages was awarded on the basis of only $17,570 in compensatory 
damages, a very steep 200:1 ratio. 
¶106 Without even mentioning this 200:1 ratio of punitive 
damages to actual compensatory damages in this case, the 
majority, like the court of appeals, seems to adopt (although 
this is not entirely clear) Trinity's position that there is 
only a 7:1 ratio between the punitive and compensatory damages, 
citing evidence of "a harm" of $490,000.  Majority op., ¶65.  
The $490,000 figure represents Trinity's liability in the 
underlying auto accident, but that amount has no bearing on the 
actual or even potential compensatory damages in the bad faith 
claim.  As noted above, Trinity was never at risk for the auto 
accident damages, because either the agent (that is, his errors 
and omissions carrier) or Tower was responsible for the mistake 
in the insurance application.  The actual compensatory damages 
in the bad faith claim consisted of the attorneys' fees Trinity 
incurred in the coverage dispute, not the personal injury 
damages in the underlying lawsuit, which Trinity would not and 
did not have to pay.11 
                                                 
 
11  In discussing the standard of review, the majority notes 
that in Management Computer Services v. Hawkins, Ash, Baptie & 
No.  01-1201.dss 
 
10 
 
¶107 The majority recognizes that due process requires a 
comparison of punitive damages to compensatory damages, and that 
"[c]ompensatory damages represent the actual harm inflicted on 
the plaintiff."  Majority op., ¶63.  Inexplicably, the majority 
fails to undertake the proper comparison (punitive damages to 
actual compensatory damages) and instead endorses (apparently) 
an improper comparison of punitive damages to a measure of 
"potential harm" that has no relationship to the bad faith claim 
upon which the punitive damages award was premised.  As noted 
above, there was no "potential" that Trinity would have to pay 
the claimant in the underlying lawsuit, because either the 
insurance agent or Tower would be required to do so depending 
upon the result of the coverage litigation.  In any event, a 
comparison of punitive damages to a creative (but obviously 
inapplicable) 
measure 
of 
"potential 
harm" 
is 
entirely 
inappropriate where, as here, actual compensatory damages have 
in fact been determined.  Indeed, the jury was instructed that 
                                                                                                                                                             
Co., 206 Wis. 2d 158, 557 N.W.2d 67 (1996), this court faulted 
the circuit court for setting forth only "conclusory reasons" 
and failing to "analyze the evidence" on a punitive damages 
issue.  Majority op., ¶48.  The majority makes the same mistake 
here in its evaluation of the second BMW factor.  It says that 
"Tower introduced evidence that the only potential damage in 
this case was $17,000."  Majority op., ¶65.  Actually, the 
$17,570 
figure 
definitively 
represents 
the 
actual——not 
"potential"——compensatory damages in this case.  The majority 
then notes that "Trinity introduced evidence of a [potential] 
harm of $490,000," and goes on to conclude that "[t]he punitive 
damages award represents a 7:1 ratio of punitive damages to 
compensatory damages, if Trinity's position is applied."  Id. 
(emphasis added). Apparently the majority is adopting "Trinity's 
position," although it does not say so directly (there is the 
qualifier "if"), and it gives no reasons for doing so. 
  
No.  01-1201.dss 
 
11 
 
the compensatory damages were $17,570 and that punitive damages 
may be awarded based upon that amount of compensatory damages.  
The majority's position, apparently adopting Trinity's, amounts 
to nothing more than a manipulation of the ratio for purposes of 
due process scrutiny.12 
¶108 The majority's approach to this second BMW factor is 
also directly at odds with Campbell.  There, the Supreme Court 
compared the punitive damages award to the actual compensatory 
damages in the bad faith action, not the damages in the 
underlying auto accident litigation.  Campbell, 123 S.Ct. at 
1524. 
¶109 The Supreme Court also stated in Campbell that it is 
now an established principle in the law of punitive damages that 
"few awards exceeding a single-digit ratio between punitive and 
compensatory damages . . . will satisfy due process."  Id. at 
1524.  The Court, having declared that the case was "neither 
close nor difficult," held that the 145:1 ratio of punitive-to-
compensatory damages in Campbell could not pass constitutional 
                                                 
 
12   The Supreme Court reiterated in State Farm Mut. Auto. 
Ins. Co. v. Campbell, 538 U.S. ___, 123 S.Ct. 1513, 1520 (2003), 
that "[t]he Due Process Clause does not permit a State to 
classify arbitrariness as a virtue.  Indeed, the point of due 
process——of the law in general——is to allow citizens to order 
their behavior.  A State can have no legitimate interest in 
deliberately making the law so arbitrary that citizens will be 
unable to avoid punishment based solely upon bias or whim."  The 
Court also stated that "[t]he principles set forth in Gore must 
be implemented with care, to ensure both reasonableness and 
proportionality."  Id. at 1525-26.  The majority's summary and 
vague apparent adoption of Trinity's position lacks the clarity 
of analysis required by the de novo due process review the 
Supreme Court has mandated.  
  
No.  01-1201.dss 
 
12 
 
muster.  Id. at 1522, 1526.  Particularly in light of this most 
recent pronouncement from the Supreme Court, the 200:1 punitive-
to-compensatory damages ratio in this case clearly exceeds 
constitutional limits.  
¶110 The third factor of the BMW analysis requires a 
comparison of the punitive damages award to any "civil or 
criminal 
penalties 
that 
could 
be 
imposed 
for 
comparable 
misconduct."  BMW, 517 U.S. at 583.  The majority notes that the 
court of appeals dismissed this factor as "largely irrelevant" 
because the court had concluded that the "legislature has not 
prescribed penalties for the type of conduct engaged in by the 
defendant."  Majority op., ¶67 (quoting Trinity, 2002 WI App 46, 
¶41). 
¶111 The majority goes on to note that the legislature has 
in fact provided a criminal penalty, including a fine of up to 
$10,000, for any violation of "any insurance statute or rule of 
this state," Wis. Stat. § 601.64(4), and that the Wisconsin 
Administrative Code contains insurance rules that prohibit 
unfair settlement practices, including the "[f]ailure to attempt 
in good faith to effectuate fair and equitable settlement of 
claims submitted in which liability has become reasonably 
clear."  Wis. Admin. Code § Ins. 6.11(3)(a)(4) (Jan. 2002).  
Majority op., ¶68.  This statute and rule proscribe conduct that 
is comparable to the tort of bad faith.  The $3.5 million 
punitive damages award in this case, evaluated against the 
$10,000 maximum fine provided for in Wis. Stat. § 601.64(4), 
yields a 350:1 ratio, even more startling than the 200:1 ratio 
No.  01-1201.dss 
 
13 
 
for punitive-to-compensatory damages.  In Campbell, the Supreme 
Court said it "need not dwell long on this [BMW] guidepost" 
because the applicable $10,000 state fine for comparable conduct 
was "dwarfed by the $145 million punitive damages award."  
Campbell, 123 S.Ct. at 1526.  The same is true here.13 
¶112 Our own precedent also requires that this punitive 
damages award be reversed.  In Management Computer Services v. 
Hawkins, Ash, Baptie & Co., 206 Wis. 2d 158, 196, 557 N.W.2d 67 
(1996), this court held that a punitive damages award of $1.75 
million on a compensatory damages award of $65,000 "is shocking 
to the conscience of the court."  Applying the BMW test, 
particularly the requirements that punitive damages bear a 
reasonable relationship to compensatory damages and possible 
criminal penalties for comparable misconduct (there, as here, 
$10,000), and noting that the case (like this one) involved 
economic injury only, this court concluded that the $1.75 
million punitive damages award "is excessive and therefore a 
                                                 
 
13 The majority cites certain language from Campbell 
regarding the third BMW factor, but it does so incompletely.  
Majority op., ¶66.  After indicating in Campbell that a criminal 
penalty may have "less utility" when used to determine the 
amount of punitive damages, the Supreme Court went on to 
emphasize that "[g]reat care must be taken to avoid use of the 
civil process to assess criminal penalties that can be imposed 
only after the heightened protections of a criminal trial have 
been observed, including, of course, its higher standards of 
proof.  Punitive damages are not a substitute for the criminal 
process, and the remote possibility of a criminal sanction does 
not automatically sustain a punitive damages award."  Campbell, 
123 S.Ct. at 1526.  As this additional language from the 
decision makes clear, the Court in Campbell was cautioning 
against using the existence of an applicable criminal penalty as 
grounds to sustain a punitive damages award, not the converse. 
  
No.  01-1201.dss 
 
14 
 
violation of due process, because it is more than is necessary 
to serve the purposes of punitive damages."  Management Computer 
Servs., 206 Wis. 2d at 196. 
¶113 It is true that there is no "mathematical bright line 
between the constitutionally acceptable and the constitutionally 
unacceptable" for purposes of comparing punitive damages to 
compensatory damages or comparable civil or criminal penalties.  
BMW, 517 U.S. at 583.  Management Computer Services' 30:1 ratio 
of punitive to compensatory damages and 175:1 ratio of punitive 
damages to comparable criminal penalties was "shocking to the 
conscience of the court" and excessive to the point of violating 
due process.  Management Computer Servs., 206 Wis. 2d at 196.  I 
can find no principled way to reach a different conclusion in 
this case, which presents a 200:1 ratio of punitive to 
compensatory damages and a 350:1 ratio of punitive damages to 
comparable criminal penalties. 
¶114 Accordingly, I would reverse the court of appeals' 
decision to the extent that it upheld the award of punitive 
damages in this case, and remand the entire matter for a new 
trial on bad faith liability as well as punitive damages. 
¶115 I am authorized to state that Justices JON P. WILCOX 
and DAVID T. PROSSER JR. join this dissent.   
 
 
No.  01-1201.dss 
 
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