Title: Roehl Transport, Inc. v. Liberty Mutual Insurance Company

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2010 WI 49 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2008AP1303 
COMPLETE TITLE: 
 
 
Roehl Transport, Inc., 
          Plaintiff-Appellant-Cross-Respondent, 
     v. 
Liberty Mutual Insurance Company, 
          Defendant-Respondent-Cross-Appellant, 
Barbara Reilly, Brian Kaminski and Charles 
Kilander, 
          Defendants. 
 
 
 
 
ON CERTIFICATION FROM THE COURT OF APPEALS 
 
 
OPINION FILED: 
June 22, 2010   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
March 3, 2010   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
St. Croix   
 
JUDGE: 
Eric J. Lundell   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
        
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the plaintiff-appellant-cross-respondent there were 
briefs by Lawrence R. King, Mark A. Solheim, and Larson • King, 
LLP, Saint Paul, Minn., and Matthew A. Biegert and Doar Drill & 
Skow, S.C., New Richmond, and oral argument by Lawrence R. King. 
 
For the defendant-respondent-cross-appellant there were 
briefs by William J. Katt, Mark D. Malloy, and Leib & Katt, LLC, 
Milwaukee, and oral argument by William J. Katt. 
 
An amicus curiae brief was filed by Lynn R. Laufenberg and 
the Laufenberg Law Group, S.C., Milwaukee, on behalf of the 
Wisconsin Association for Justice. 
 
An amicus curiae brief was filed by Thomas R. Schrimpf, 
Melissa J. Lauritch, and Hinshaw & Culbertson LLP, Milwaukee, on 
behalf of the Wisconsin Insurance Alliance. 
 
 
 
 
2010 WI 49
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2008AP1303 
(L.C. No. 
2006CV419) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Roehl Transport, Inc., 
 
          Plaintiff-Appellant-Cross-Respondent, 
 
     v. 
 
Liberty Mutual Insurance Company, 
 
          Defendant-Respondent-Cross-Appellant, 
 
Barbara Reilly, Brian Kaminski and Charles 
Kilander, 
 
          Defendants. 
 
 
 
FILED 
 
JUN 22, 2010 
 
David R. Schanker 
Clerk of Supreme Court 
 
 
 
 
 
APPEAL from a judgment and an order of the Circuit Court 
for St. Croix County, Eric J. Lundell, Judge.  Affirmed in part, 
reversed in part and remanded. 
 
¶1 
SHIRLEY S. ABRAHAMSON, C.J.   This is an appeal and 
cross appeal from a judgment and order of the Circuit Court for 
St. Croix County, Hon. Eric J. Lundell, Judge, on certification 
No. 
2008AP1303   
 
2 
 
by the court of appeals pursuant to Wis. Stat. § 809.61 (2007-
08).1 
¶2 
Roehl Transport, Inc., the plaintiff insured, brought 
an 
action 
against 
its 
insurance 
company, 
Liberty 
Mutual 
Insurance Company, for the tort of bad faith.  A Truckers/Auto 
Insurance 
Policy 
issued 
by 
Liberty 
Mutual 
insured 
Roehl 
Transport, Inc. up to $2 million in liability coverage.  The 
policy had a $500,000 deductible, meaning that Roehl Transport, 
Inc. agreed to pay the initial $500,000 on certain claims made 
against it under the policy.  Liberty Mutual was responsible for 
paying any damages between the $500,000 deductible and the $2 
million policy limit. 
¶3 
Roehl Transport's bad faith claim against Liberty 
Mutual stems from Liberty Mutual's handling of a personal injury 
claim brought against Roehl Transport by Arthur Groth.  Groth's 
car was rear-ended by one of Roehl Transport's trucks.  Groth 
was injured and sued Roehl Transport and Liberty Mutual for 
damages. The jury found Roehl Transport liable to Groth and 
awarded Groth $830,400 in damages.  This verdict was well within 
the $2 million dollar limit of the insurance coverage but cost 
Roehl Transport all of its $500,000 deductible.   
¶4 
The 
facts 
and circumstances of Liberty Mutual's 
handling 
of 
Groth's 
personal 
injury 
claim 
against 
Roehl 
                                                 
1 All subsequent references to the Wisconsin Statutes are to 
the 2007-08 version unless otherwise indicated. 
No. 
2008AP1303   
 
3 
 
Transport provide the gravamen of Roehl Transport's complaint 
against Liberty Mutual for bad faith. 
¶5 
In the past, an insurance company's decision to settle 
within policy limits generally cost an insured little because 
the deductible was modest.  Here the amount of the deductible is 
substantial.  We have not previously addressed a bad faith claim 
when the judgment entered against the insured is within policy 
limits.  With the increasing prevalence of high-deductible 
policies, cases such as the present one may become more common.  
¶6 
Five issues are presented on the appeal by Roehl 
Transport and the cross-appeal by Liberty Mutual:  
(1) Does Roehl Transport, an insured with a deductible 
for its liability coverage, have a cognizable bad faith 
claim against its insurance company when the insurance 
company exercises control over the settlement of a third-
party claim and engages in bad faith conduct toward the 
insured, even though the judgment does not exceed the 
policy limits?2 
(2) Is there credible evidence in the present case to 
support the jury's finding of bad faith?3 
                                                 
2 Liberty Mutual raised this issue of law before the circuit 
court in a motion for summary judgment, in a motion for 
dismissal at the close of Roehl Transport's evidence at trial, 
and again in a post-trial motion for judgment notwithstanding 
the verdict.  The circuit court denied these motions.  Liberty 
Mutual raised this issue before this court.  
3 Liberty Mutual challenged the sufficiency of the evidence 
by a post-trial motion for change of verdict.   The circuit 
court denied the motion.  Liberty Mutual raised this issue in 
its cross appeal. 
No. 
2008AP1303   
 
4 
 
(3) Is Roehl Transport's claim for bad faith barred by 
judicial public policy considerations on the ground that 
Roehl Transport sought a jury determination regarding what 
Groth's liability claim against it "could have settled 
for?"4 
(4) Did the circuit court err in refusing to award 
attorney fees when evidence of the amount of attorney fees 
claimed by the insured for prosecuting its bad faith claim 
was not submitted to the jury?5  
(5) Did the circuit court err as a matter of law in 
denying Roehl Transport's claim for punitive damages?6 
¶7 
We hold as follows:  
(1) Roehl Transport, an insured with a deductible for 
its liability coverage, has a cognizable bad faith claim 
against its insurance company when the company has control 
                                                 
4 Liberty Mutual raised this issue on motion for summary 
judgment in the circuit court.  The circuit court denied the 
motion.  Liberty Mutual raised this issue before this court.  
5 Roehl Transport's complaint specifically sought attorney 
fees.  At the pretrial conference, Roehl Transport informed the 
circuit court that it intended to seek attorney fees.  After 
verdict, Roehl Transport petitioned for attorney fees and the 
circuit court denied Roehl Transport's motion for attorney fees.  
Roehl Transport raised this issue in its appeal.     
6 Roehl Transport's complaint specifically sought punitive 
damages.  The circuit court ruled that Roehl Transport could not 
pursue punitive damages, and the issue was not presented to the 
jury.  After verdict, Roehl Transport moved for a second jury 
trial to determine whether punitive damages should be awarded. 
The circuit court denied the motion.  Roehl Transport raised 
this issue before this court.  
No. 
2008AP1303   
 
5 
 
over settlement of a third-party claim and engages in bad 
faith conduct toward the insured, even though the judgment 
does not exceed the policy limits. 
(2) Sufficient credible evidence supports the jury's 
finding of bad faith and the jury's determination of 
damages in this case. 
(3) Judicial public policy considerations do not 
preclude Roehl Transport's bad faith claim. 
(4) Roehl Transport is entitled to attorney fees as a 
matter of law upon the jury's finding of bad faith.  The 
amount of attorney fees to be awarded is for the circuit 
court to determine on remand. 
(5) The circuit court did not err in denying Roehl 
Transport's claim for punitive damages. 
¶8 
Accordingly, we affirm the judgment and order of the 
circuit court awarding Roehl Transport damages on its bad faith 
claim and denying Roehl Transport's claim for punitive damages.  
We reverse the circuit court's denial of attorney fees to Roehl 
Transport and remand the matter of attorney fees to the circuit 
court for determination of the amount of attorney fees to be 
awarded Roehl Transport. 
¶9 
We shall address each issue of law in turn after first 
setting out the facts necessary to understand the case and the 
issues to be resolved.   
I 
¶10 The factual background necessary to decide the issues 
of 
law 
presented 
is 
neither 
complicated 
nor 
disputed.  
No. 
2008AP1303   
 
6 
 
Additional facts relevant to the various legal issues are 
presented in the discussion of each issue. 
¶11 Roehl Transport, Inc., operates a trucking company of 
about 1,500 trucks, headquartered in Marshfield, Wisconsin.  
Defendant Liberty Mutual Insurance Company is a national 
insurer.  Roehl Transport purchased insurance from Liberty 
Mutual beginning in 1989 and renewed the policy annually through 
2000.  The policy covered liability for property damage and 
bodily injury up to $2 million.  The policy included an 
endorsement specifically negotiated and agreed upon between 
Everett Roehl, then president of Roehl Transport, and Liberty 
Mutual, for a deductible of $500,000 per occurrence for 
automobile liability and general liability coverage.7 
¶12 The policy at issue in this suit was effective from 
December 1, 1999 to December 1, 2000. 
¶13 The liability coverage in Roehl Transport's policy 
covered "all sums" that Roehl Transport was required to pay as 
damages for bodily injury or property damage, as follows: 
We [Liberty] will pay all sums an "insured" legally 
must pay as damages because of "bodily injury" or 
"property damage" to which this insurance applies, 
caused by an "accident" and resulting from the 
ownership, maintenance or use of a covered "auto." 
¶14 Despite 
the 
large 
deductible, 
the 
policy 
also 
provided, as is customary in Liberty Mutual policies, that 
                                                 
7 Roehl 
Transport's 
deductible 
under 
the 
policy 
was  
$500,000 
per 
occurrence 
for 
general 
liability 
and 
auto 
liability.  Liberty Mutual does not dispute that the Groth claim 
was within this coverage.     
No. 
2008AP1303   
 
7 
 
Liberty Mutual retained control over the claims process.  
Liberty Mutual had the right and duty to defend the insured 
against a suit asking for damages covered under the policy and 
could investigate and settle any claim or suit as Liberty Mutual 
considered appropriate.  The policy's settlement provision reads 
as follows:  
We [Liberty] have the right and duty to defend any 
"insured" against a "suit" asking for . . . [covered] 
damages . . . . We may investigate and settle any 
claim or "suit" as we consider appropriate.  Our duty 
to defend or settle ends when the Liability Coverage 
Limit of Insurance has been exhausted by payment of 
judgments or settlements.  
¶15 Roehl Transport paid Liberty Mutual a fee for claim 
handling.  Liberty Mutual provided Roehl Transport with a 
customer service representative whose sole function was to act 
as an ombudsman in the event Roehl Transport had concerns about 
a claim.  Roehl Transport also negotiated "Special Handling 
Instructions" with Liberty Mutual, which were not part of the 
insurance policy, giving Roehl Transport input in settlement and 
handling of claims and promising to provide Roehl Transport with 
information during the claims handling procedure.8  
¶16 The 
present dispute between Roehl Transport and 
Liberty Mutual arose from Liberty Mutual's handling of a 
personal injury claim against Roehl Transport brought by Arthur 
                                                 
8 The Special Handling Instructions provided: "We [Liberty 
Mutual] have agreed to discuss and obtain the insureds [sic] 
agreement on all bodily injury settlements.  Pricing should be 
discussed with [Roehl Transport Safety Director] Terry Littleton 
prior to entering negotiations." 
No. 
2008AP1303   
 
8 
 
Groth, whose car was rear-ended by a Roehl Transport truck on 
January 20, 2000.  Roehl Transport notified Liberty Mutual of 
the collision on the day it occurred, and Liberty Mutual took on 
the investigation and handling of Groth's claim.  No settlement 
was reached with Groth.  Groth sued and obtained a jury verdict 
of $830,400 against Roehl Transport, consuming Roehl Transport's 
full $500,000 deductible.9 
¶17 Roehl Transport filed the suit that is the subject of 
this appeal against Liberty Mutual, alleging numerous claims. 
Only the action for bad faith was ultimately pursued; the jury 
was instructed only on the bad faith claim; and only the bad 
faith claim is at issue here. 
¶18 In summary, Roehl Transport alleges that Liberty 
Mutual missed the opportunity to settle the Groth claim for less 
than the full amount of Roehl Transport's $500,000 deductible.  
Roehl Transport asserts that Liberty Mutual's handling of the 
Groth 
claim 
was 
replete 
with 
inadequate 
investigation, 
inexperienced and high-turnover staffing, and lack of good faith 
efforts in pursuing settlement, all of which Roehl Transport 
asserts resulted in Liberty Mutual's failure to settle the Groth 
claim for less than the ultimate jury verdict, resulting in 
damages to Roehl Transport.   
¶19 Liberty Mutual moved for summary judgment on the bad 
faith claim, arguing that Roehl Transport's bad faith claim is 
                                                 
9 Further details regarding Liberty Mutual's handling of 
Groth's claim are set out below in our analysis of Liberty 
Mutual's challenge to the jury verdict.   
No. 
2008AP1303   
 
9 
 
not recognized in Wisconsin law because the judgment entered in 
the Groth lawsuit against Roehl Transport was not in excess of 
the $2 million policy limit.  Roehl Transport also moved for 
summary judgment. 
¶20 In a memorandum decision and order, the circuit court 
"disagree[d] with Liberty's suggestion that Roehl's claims are 
not recognized by Wisconsin law."  Relying on Anderson v. 
Continental 
Insurance 
Co., 
85 
Wis. 2d 675, 
685-86, 
271 
N.W.2d 368 (1978), the circuit court determined "that Roehl 
asserted a bad faith claim against Liberty and that such a claim 
is recognized in Wisconsin."  The circuit court also determined 
that "[w]hether Liberty satisfied its implied duty of good faith 
or, on the other hand, whether 'important facts were recklessly 
ignored and disregarded' during Liberty's adjustment of the 
claim are questions of fact."   
¶21 The case proceeded to a jury trial.  Both parties 
presented evidence, including testimony from expert witnesses.  
Roehl Transport argued that the Groth claim should have settled 
for $100,000 in 2001 and asked the jury for damages of $400,000, 
representing the difference between the $100,000 settlement 
figure and the $500,000 deductible.  Liberty Mutual argued for a 
finding of no bad faith and no damages.   
¶22 The jury found that Liberty Mutual's conduct was in 
bad faith and awarded Roehl Transport $127,000 in compensatory 
No. 
2008AP1303   
 
10 
 
damages.10  The jury returned a three-part special verdict in 
favor of Roehl Transport, finding: (1) that Liberty Mutual 
breached duties owed to Roehl Transport in the handling of the 
Groth claim; (2) that Liberty Mutual's failure to perform its 
duties 
to 
Roehl 
Transport 
"demonstrate[d] 
a 
significant 
disregard of Roehl Transport's interests such that [Liberty 
Mutual's] failure to settle the Groths' claim was done in bad 
faith;" and (3) that $127,000 should be awarded as the "sum of 
money [that] will fairly and reasonably compensate Roehl 
Transport for the bad faith actions of Liberty Mutual Insurance 
Company."   
¶23 In a post-trial motion for judgment notwithstanding 
the verdict, Liberty Mutual renewed its argument that Roehl 
Transport's bad faith claim is not recognized in Wisconsin law 
because the claim against the insured did not result in 
liability to Roehl Transport exceeding the $2 million limit of 
its liability coverage.  The circuit court denied Liberty 
Mutual's motions.  
¶24 Roehl Transport filed post-trial motions for an award 
of attorney fees and for a second trial on punitive damages.  
The circuit court denied these motions.  This appeal and cross-
appeal followed.  
                                                 
10 Roehl Transport contested the jury's valuation in post-
verdict motions.  The circuit court concluded sufficient 
evidence existed in the record to support the jurors' verdict 
and that "there are multiple possibilities for how they arrived 
at the final figure."  On appeal, neither side contests the 
jury's damage figure.  
No. 
2008AP1303   
 
11 
 
II 
¶25 We turn first to the question whether a cognizable bad 
faith claim exists in Wisconsin when a verdict against the 
insured in the underlying third-party liability claim is less 
than policy limits but costs the insured its deductible.  The 
question presented is one of law to be determined by this court 
independently and benefiting from the analysis of the circuit 
court.11  
A 
¶26 Roehl Transport argues that in investigating and 
handling a claim of liability against it, Liberty Mutual may not  
ignore the interests of Roehl Transport.  Roehl Transport 
                                                 
11 This legal issue was presented to the circuit court in 
motions by Liberty Mutual.  Liberty Mutual moved for summary 
judgment.  We review summary judgment decisions using the same 
standards and methods applied by the circuit court.  Under Wis. 
Stat. § 802.08(2), a moving party is entitled to summary 
judgment 
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.  See Green Spring Farms v. Kersten, 
136 Wis. 2d 304, 315, 401 N.W.2d 816 (1987).  Neither party 
contends that there are disputed issues of fact material to 
resolving the legal issue of whether a bad faith claim may be 
brought in the present case. 
Liberty Mutual also moved for dismissal at the close of 
Roehl Transport's evidence at trial, arguing that without 
evidence of a verdict in excess of policy limits, there was no 
credible evidence to support Roehl Transport's bad faith claim. 
Liberty Mutual also moved for judgment notwithstanding the 
verdict, challenging whether the facts found in the verdict were 
legally sufficient to permit recovery in the absence of a 
verdict in excess of policy limits. 
No. 
2008AP1303   
 
12 
 
contends 
that 
Liberty 
Mutual 
cannot 
conduct 
a 
slipshod 
investigation, ignore settlement opportunities, mishandle the 
legal defense, and engage in all manner of misconduct, thus 
wasting Roehl Transport's $500,000 deductible, but then avoid 
legal responsibility for its alleged bad faith actions only 
because the judgment entered was within policy limits.  In sum, 
Roehl Transport's position is that if Liberty Mutual breaches 
its duty of good faith during adjustment of the claim, Liberty 
Mutual should be held liable for Roehl Transport's damages in a 
bad faith tort claim. 
¶27 In 
contrast, 
Liberty 
Mutual 
argues 
that 
Roehl 
Transport cannot succeed in a bad faith claim against it in the 
absence of a verdict in excess of policy limits and that because 
Roehl Transport bargained for lower premiums by accepting a high 
deductible, it cannot now complain that it was required to pay a 
sum up to the amount of its deductible.  Liberty Mutual contends 
that only the following three types of bad faith claims are 
recognized in Wisconsin12 and that this case does not fall within 
any of the three types:  
(1) 
An insured may bring a bad faith action against 
the insurance company for failing to settle the 
claim 
with 
a 
third-party 
claimant 
when 
the 
ultimate 
judgment 
exposes 
the 
insured 
to 
a 
judgment in excess of the policy limits.  This 
                                                 
12 See A.W. Huss Co. v. Cont'l Cas. Co., 735 F.2d 246, 249 
(7th Cir. 1981) (citing Kranzush v. Badger State Mut. Cas. Co., 
103 Wis. 2d 56, 60-62, 307 N.W.2d 256 (1981)). 
No. 
2008AP1303   
 
13 
 
type of claim is known as a third-party bad faith 
claim.13  
(2) 
An insured may bring a bad faith action "when the 
insurer unreasonably and in bad faith withholds 
payment of the claim of its insured."14  This type 
of claim is known as a first-party bad faith 
claim.15 
(3) 
A claimant may have a bad faith action against an 
insurance company based on the insurance company's 
failure to reimburse the claimant for a worker's 
compensation claim. 
¶28 Liberty Mutual is correct that the facts of the 
present case do not completely fit within any of the three types 
                                                 
13 Third-party bad faith cases may be described as "bad 
faith cases based on a liability insurer's failure to accept a 
third-party claimant's offer to settle his claim against the 
insured."  Stephen S. Ashley, Bad Faith Actions: Liability and 
Damages § 3:01 (2d ed. 1997). 
14 Kranzush v. Badger State Mut. Cas. Co., 103 Wis. 2d 56, 
62, 307 N.W.2d 256 (1981) (quoting Anderson v. Cont'l Ins. Co., 
85 Wis. 2d 675, 689, 271 N.W.2d 368 (1978)). 
15 In a first-party bad faith case, the insured has a bad 
faith claim against its insurance company for the company's 
failure to exercise good faith in paying benefits or honoring 
the insured's claim under the policy against the insurance 
company.  "First party insurance generally describes those types 
of 
insurance 
coverage 
under 
which 
the 
insured 
(or 
his 
beneficiaries) recovers benefits directly from his own insurer 
without the need to establish fault (e.g., life, fire, accident 
and health, and income disability coverages)."  John J. Kircher, 
Insurer's Mistaken Judgment——A New Tort?, 59 Marq. L. Rev. 775, 
775 n.3 (1976). 
No. 
2008AP1303   
 
14 
 
of claims already recognized as cognizable bad faith claims in 
Wisconsin.   
¶29 The instant case does, however, fit in large part 
within the first type of bad faith claim described above: The 
present case is a third-party bad faith claim.  The key 
distinction 
between 
the 
instant 
case 
and 
the 
previously 
recognized third-party bad faith claim is that Roehl Transport 
was not exposed to a judgment in excess of its policy limit. 
B 
¶30 The 
question 
presented 
in 
the 
instant 
case 
is 
therefore whether an excess liability judgment, that is, a 
judgment in an amount greater than the insurance policy's 
coverage, is a necessary prerequisite for an insured to bring a 
third-party bad faith claim under Wisconsin law.  Another way to 
view the question is whether the three types of bad faith claims 
described above are the only types of bad faith claims 
cognizable in Wisconsin.   
¶31 The availability of a bad faith claim under the facts  
in the instant case has not previously been decided by this 
court.  
¶32 This court must therefore analyze the cause of action 
for bad faith in insurance cases to determine whether the facts 
of the instant case fit the framework of bad faith claims 
recognized by Wisconsin law.   
¶33 We begin by noting that "[i]n Wisconsin as in many 
states the doctrine of bad faith in insurance claims is a case 
No. 
2008AP1303   
 
15 
 
law development."16  The Wisconsin Supreme Court first allowed a 
cause of action for bad faith in 1916 and fully recognized the 
tort of bad faith in 1931.17  Thereafter, Wisconsin case law has 
continued to develop the tort.   
¶34 The case law, our precedent, guides us in determining 
whether the fact situation presented here supports Roehl 
Transport's bad faith claim.  Our analysis follows traditional 
methods and principles of common-law analysis.   
¶35 Liberty Mutual argues that Roehl Transport's claim is 
not and should not be recognized by the law.  To the extent 
Liberty Mutual argues that the three previously recognized 
situations giving rise to a bad faith cause of action are 
exclusive, 
it 
asks 
the 
court 
to 
arrest 
the 
common-law 
development of the tort of bad faith.   
¶36 No Wisconsin case holds that the three types of bad 
faith claims previously recognized are the only situations in 
which a claim of insurance bad faith may be recognized.  Nor do 
Wisconsin cases purport to catalogue all possible bad faith 
claims.  We cannot unearth any hint in the case law that the 
tort of bad faith is confined to the three fact patterns 
described in the existing case law.  Rather, the three 
                                                 
16 Huss, 735 F.2d at 249. 
17 The earliest Wisconsin cases recognizing a bad faith 
cause of action are among the first in any jurisdiction.  For a 
treatment of the historical development of bad faith cause of 
action in jurisdictions around the country, see Ashley, supra 
note 13, ch. 2.   
No. 
2008AP1303   
 
16 
 
identified types of insurance bad faith claims arise from fact 
situations presented to the courts to date.   
¶37 A review of the history of the tort reveals an 
evolution of the tort of bad faith over the decades.  The case 
law first recognized a bad faith claim in third-party claims 
with judgments exceeding policy limits, while later cases 
recognized the validity of the claim in two novel situations:  
first-party claims and workers' compensation claims.  The 
common-law history of insurance bad faith claims in this state 
requires the court to analyze the facts of the claim presented 
and determine whether the established principles of the tort of 
bad faith support recognizing the claim presented as raising a 
valid cause of action.   
¶38 Our analysis is set out in two steps.  We first 
summarize the principles derived from our case law.  These 
principles support our conclusion that the instant case fits 
within the framework of bad faith insurance claims long 
recognized by our cases.  The facts here therefore give rise to 
a cognizable bad faith claim.  After summarizing the principles 
distilled from the cases, we then discuss the particular cases 
in which those guiding principles have been developed.   
¶39 The principles of the tort of bad faith can be 
summarized as follows. 
No. 
2008AP1303   
 
17 
 
¶40 First, a bad faith claim "sounds in tort."18  The tort 
cause of action for bad faith arises out of a contractual 
arrangement but is not a contract action.   
¶41 Rather, 
the 
tort 
of 
bad 
faith 
is 
a 
separate 
intentional wrong, which results from a breach of a duty imposed 
as a consequence of the contractual relationship.19  An insurance 
company owes a duty to its insured to settle or compromise a 
claim made against the insured and to act in good faith in doing 
so.20  The duty is implied by the terms of the insurance policy 
that give the insurance company exclusive power to settle 
claims.21   
¶42 Thus, the tort of bad faith intrinsically relates to 
the nature and existence of the insurance contract.22  Because 
the duty is rooted in the contractual relationship, this court 
                                                 
18 Anderson v. Cont'l Ins. Co., 85 Wis. 2d 675, 686, 271 
N.W.2d 368 (1978) ("bad faith conduct by one party to a contract 
toward another is a tort separate and apart from a breach of 
contract per se");  Kranzush, 103 Wis. 2d at 60 ("Under our case 
law the notion that an insurance company may be required to 
respond in extracontractual damages as a result of certain 
tortious conduct in the settlement of claims or the payment of 
benefits has evolved into three separate theories of bad faith 
recovery."). 
19 Anderson, 85 Wis. 2d at 687. 
20 Mowry v. Badger State Mut. Cas. Co., 129 Wis. 2d 496, 
510, 385 N.W.2d 171 (1986); Alt v. Am. Family Mut. Ins. Co., 71 
Wis. 2d 340, 347, 237 N.W.2d 706 (1976). 
21 Mowry, 129 Wis. 2d at 510. 
22 Hilker v. Western Auto. Ins. Co., 204 Wis. 1, 13-16, 235 
N.W. 413 (1931). 
No. 
2008AP1303   
 
18 
 
has refused to recognize a bad faith claim when a claimant was 
not in a contractual relationship with an insurance company.23  
In the present case, Roehl Transport and Liberty Mutual have a 
contractual relationship, the insurance policy.  
¶43 Second, the tort of bad faith is derived from the 
implied covenant of good faith and fair dealing found in every 
contract.24  Thus the breach of duty from which the tort claim 
follows is not of any explicit term of the contractual 
obligations but of the implicit duty to act in good faith in 
carrying out the insurance contract.   
¶44 Third, third-party bad faith claims arose to protect 
holders of insurance policies against abusive, "bad faith" 
practices of insurance companies in adjusting or settling 
liability claims against the insured when the interests of the 
insured are in the hands of the insurance company and may come 
into conflict with the insurance company's own interests.   
                                                 
23 Kranzush v. Badger State Mut. Cas. Co., 103 Wis. 2d 56, 
307 N.W.2d 256 (1981).  
24 Anderson, 85 Wis. 2d at 689 (relying on the Restatement 
(Second) of Contract § 205 (1981)).  See Allis Chalmers Corp. v. 
Lueck, 471 U.S. 202, 216-17 (1985) (examining Wisconsin bad 
faith law; observing that "the implied duty to act in good faith 
is different from the explicit contractual duty" and "the tort 
exists for breach of a 'duty devolv[ed] upon the insurer by 
reasonable implication from the express terms of the contract'" 
(quoting Hilker, 204 Wis. at 16)). 
Good faith is an implied covenant arising from the 
contractual relationship.  14 Couch on Insurance § 198:5 (3d ed. 
2005).  
No. 
2008AP1303   
 
19 
 
¶45 Such conflict arises in the traditional third-party 
bad faith claim when the insurance company retains exclusive 
control over settling claims against the insured and the value 
of the claim might exceed the policy limits but the tort victim 
offers to settle the claim within policy limits.   
¶46 On the one hand, the insurance company's acceptance of 
the settlement offer would protect the interests of the insured 
by limiting total liability to an amount the insurance company 
will pay.     
¶47 On the other hand, the insurance company's rejection 
of a settlement offer for policy limits may better serve the 
interest of the insurance company.  If the insurance company 
"wins" at trial, by defeating the claim outright or by at least 
achieving a judgment within policy limits, the insurance company 
will be in a better position than it would have been in had it 
accepted the settlement offer.  But if the insurance company 
"loses" at trial, it will be in no worse a position than it 
would have been in had it accepted the settlement offer.  
¶48 An insurance company's rejection of a settlement offer 
for policy limits thus risks much for the insured but little for 
the insurance company.  The insurance company's obligation will 
be limited to the policy limits while the insured might become 
personally liable for any judgment above the policy limits.  
Therefore, in these traditional third-party bad faith cases, 
when the insurance company rejects a policy limits settlement 
offer, it is, in effect, gambling with the insured's money. 
No. 
2008AP1303   
 
20 
 
¶49 Under these circumstances, the case law has recognized 
that the interests of the insurance company and the insured are 
in conflict.  Courts have concluded that when there is such a 
conflict of interests, the insurance company will be liable if 
it fails to exercise good faith in settling the claim.  Good 
faith means being faithful to one's duty or obligation.  "[B]ad 
faith means being recreant thereto."25   
¶50 The insurance company's duty of good faith arises 
because the insured has bartered away its rights to control 
settlement to the insurance company and must depend on the 
insurance company to investigate and settle the matter properly. 
An insurance company cannot merely wait for a legally binding 
offer to settle; it has a positive duty "to take the initiative 
and attempt to negotiate a settlement within the policy 
coverage."26  An insured is given a bad faith tort cause of 
action to protect against the risk that an insurance company may 
place its own interests above those of the insured and that the 
recovery available to the insured for breach of contract would 
not fully compensate the insured for the resulting harms.27  When 
                                                 
25 Hilker, 204 Wis. at 13. 
26 Alt, 71 Wis. 2d at 351-52 (quoting Rova Farms Resort, 
Inc. v. Investors Ins. Co. of Am., 323 A.2d 495, 507 (N.J. 1974) 
("We . . . hold that an insurer . . . has a positive fiducially 
duty to take the initiative and attempt to negotiate a 
settlement within the policy coverage."); II Arnold P. Anderson, 
Wisconsin Insurance Law § 8.30 (5th ed. 2004). 
27 For a discussion of traditional contract remedies and the 
resulting recognition of a remedy in tort, see Ashley, supra 
note 13, §§ 2:02-2:03. 
No. 
2008AP1303   
 
21 
 
an insurance company breaches its duty of good faith, it might 
therefore become liable for the tort of bad faith.   
¶51 The present case is much like the traditional third-
party bad faith claims recognized in this state.  In the present 
case, Roehl Transport has agreed to pay part of any settlement, 
that is, it has agreed to pay up to its deductible, and has also 
agreed to pay in excess of policy limits.  Roehl Transport has 
relinquished to Liberty Mutual the right to negotiate on its own 
behalf with third-party claimants.     
¶52 Roehl Transport, the insured, is therefore dependent 
on Liberty Mutual, the insurance company, to see that the 
insured's best interests are protected as the insurance company 
deals with third-party claims.  Liberty Mutual has a duty of 
good 
faith 
with 
respect 
to 
matters 
falling 
within 
its 
responsibilities under the policy.  A duty of good faith, as we 
stated previously, inures to every contract.28   
¶53 Under the circumstances of the present case in which 
the 
insured 
has 
a 
significant 
deductible, 
the 
insurance 
company's and the insured's interests might diverge, and the 
insurance company could make decisions in settling claims that 
favor its own interests over those of the insured.  The 
insurance company might offer an unnecessarily high settlement 
within 
the 
deductible 
to 
avoid 
the 
expense 
of 
diligent 
investigation and adjustment.  Or it might expend insufficient 
effort to investigate a claim unless or until the insurance 
                                                 
28 See Anderson, 85 Wis. 2d at 688-89. 
No. 
2008AP1303   
 
22 
 
company's own money is at risk when the value of the claim 
approaches or exceeds the deductible.   
¶54 The insurance company's apparent interest in settling 
claims below the deductible is to minimize its own costs, not 
necessarily to minimize the total payment to the claimant.  Just 
as in traditional third-party excess judgment cases, the insured 
with a high deductible needs the protection of a bad faith cause 
of action to guard against the risk that an insurance company's 
exercise of control over a claim might favor its own financial 
interests over those of the insured.  This possibility gives 
rise to a cause of action for bad faith. 
¶55 The present situation is thus analogous to the third-
party situation in which a claim may exceed the policy limits.  
In both instances, the insurance company has control over 
settlement, the insured has direct financial exposure as a 
result of the insured's conduct, and the interests of the 
insurance company and the insured diverge.  An insurance 
company's bad faith conduct exposes an insured to a set of harms 
not covered by the policy.  
¶56 Liberty Mutual would not be free to disregard Roehl 
Transport's interest if liability had exceeded policy limits, 
and similarly Liberty Mutual is not free to disregard Roehl 
Transport's interest when liability was less than policy limits 
but implicated Roehl Transport's liability for the deductible.  
Similarly, an insurance company may not burden the insured with 
payment of the deductible through its failure to negotiate 
settlement or conduct its investigation of the claim in good 
No. 
2008AP1303   
 
23 
 
faith.  If the insurance company fails to act in good faith, the 
insured might bring a bad faith action.   
¶57 For the very reasons our cases have concluded that an 
insurance company becomes liable for the tort of bad faith when 
it fails to act in good faith and exposes its insured to 
liability over policy limits, we likewise conclude that an 
insurance company may be liable for the tort of bad faith when 
the insurance company fails to act in good faith and exposes the 
insured to liability for sums within the deductible amount. 
¶58 We conclude that Roehl Transport raises a cognizable 
claim of bad faith in the present case, which, if proved, allows 
for recovery against Liberty Mutual.  
C 
¶59 We now examine the seminal Wisconsin bad faith 
insurance cases that inform our decision.   
¶60 One of the earliest cases recognizing that a claim 
might lie against an insurance company for "bad faith" in 
handling a third-party liability claim against the insured is 
Wisconsin Zinc Co. v. Fidelity & Deposit Co. of Maryland, 162 
Wis. 39, 155 N.W. 1081 (1916).  
¶61 In Wisconsin Zinc, an injured employee sued his 
employer.  The employers' insurance company refused settlement 
offers within policy limits.  The employee sued the insured 
employer and was awarded a judgment for which the employer paid 
a substantial sum beyond the policy coverage.  Wisconsin Zinc, 
162 Wis. 39, 41-42.   
No. 
2008AP1303   
 
24 
 
¶62 The employer in turn sued its insurance company for 
refusing the settlement offer.  The employer set out three 
causes of action based on the same facts, "[o]ne on contract, 
one in tort [negligence], and one based on fraud."  Wisconsin 
Zinc, 162 Wis. at 40.  The court dismissed the contract and 
negligence causes of action because the insurance contract did 
not explicitly place a duty on the insurance company to settle 
claims.   
¶63 The insured's "fraud" theory was allowed to continue.  
The court observed that "the power of settlement given the 
insurer 
cannot 
be 
used 
for 
the 
purposes 
of 
fraud 
or 
oppression . . . . [T]he power conferred must not be exercised 
in bad faith. . . . [F]or such there may be a recovery."  
Wisconsin Zinc, 162 Wis. at 53.   
¶64 The Wisconsin Zinc court stated the law as prohibiting 
an insurance company from handling a claim recklessly and 
contumaciously when the result would be a loss to both the 
insurance company and the insured:  "While the [insurance 
company] had the right to consult what it deemed to be its own 
interest in making a settlement, it could not abuse the power 
vested in it and recklessly and contumaciously refuse to settle 
if it was apparent that in all reasonable probability its 
conduct would not only result in damage to the plaintiff but 
also in loss to itself."  Wisconsin Zinc, 162 Wis. at 54.  
¶65 Wisconsin Zinc was revisited fifteen years later in 
this court's landmark bad faith insurance case, Hilker v. 
No. 
2008AP1303   
 
25 
 
Western Automobile Insurance Co., 204 Wis. 1, 231 N.W. 257 
(1930), reh'g & further opinion, 235 N.W. 413 (1931).   
¶66 The Hilker case arose from an automobile insurance 
policy that provided liability coverage with a limit of $5,000 
per injured person and gave the insurance company "full and 
complete control of the handling and adjustment of all claims."  
Hilker, 204 Wis. at 3.  The insurance company defended two 
actions resulting in judgments totaling $10,500.  The policy 
holder sued the insurance company, alleging that it "acted in 
bad 
faith 
in 
conducting 
the 
defense 
of 
these 
actions 
and . . . that they could have been adjusted for a sum less than 
$5,000."  Hilker, 204 Wis. at 3.  The court affirmed a judgment 
in favor of the insured against the insurance company.   
¶67 Hilker 
is 
often 
discussed 
in 
the 
context 
of 
articulating the standard for bad faith conduct.29  Here, our 
focus is on Hilker's explanation of the conditions and competing 
interests that give rise to a claim for bad faith.  Three 
observations are especially significant.   
¶68 First, according to Hilker, the duty to settle or 
compromise a claim is recognized although it is not expressly 
imposed by the policy.  Hilker, 204 Wis. at 13. 
¶69 Second, the Hilker court concluded that the insurance 
company's duty to settle a claim need not arise from an explicit 
obligation to settle but "is implied as a correlative duty 
                                                 
29 For a discussion of the standard for third-party bad 
faith cases as articulated in the Hilker case and in later 
Wisconsin cases, see II Anderson, supra note 26, §§ 8.12-.26.  
No. 
2008AP1303   
 
26 
 
growing out of certain rights and privileges which the contract 
confers upon the insurer."  Hilker, 204 Wis. at 13.    
¶70 Third, Hilker emphasized the underlying rationale for 
allowing an insured's claim for an insurance company's bad 
faith:  the conflicting interests of the insured and the 
insurance company and the need to protect the insured when 
control of negotiations is taken from the insured and given to 
the insurance company.  The Hilker court explained that the 
insurance company's duty to settle or compromise a claim arises 
"because the insured has bartered to the insurance company all 
of the rights . . . to protect himself as best he can from the 
consequences of the injury."  Hilker, 204 Wis. at 14.   
¶71 The court explained an insurance company's duty, the 
breach of which gives rise to a claim of bad faith, as follows: 
In express terms the contract imposes no duty at all a 
breach of which makes the insurer liable to the 
insured for a failure to settle or compromise a claim.  
However . . . the insurer does owe to the insured some 
duty in this respect.  This duty is implied as a 
correlative duty growing out of certain rights and 
privileges 
which 
the 
contract 
confers 
upon 
the 
insurer.  By the terms of this contract the absolute 
control of the defense of such actions is turned over 
to the insurer, and the insured is excluded from any 
interference in any negotiations for settlement or 
legal procedure.  It is generally understood that 
these are rights and privileges which it is necessary 
for the insurer to have in order to justify or enable 
it to assume the obligations which it does in the 
contract of insurance. 
Hilker, 204 Wis. at 13-14.   
¶72 The Hilker court emphasized that an insured has an 
"interest" or "concern" in how a claim is to be settled when the 
No. 
2008AP1303   
 
27 
 
insurance company controls settlement and the injured person's 
recovery exceeds the liability limits of the insurance policy:    
So long as the recovery does not exceed the limits of 
the insurance, the question of whether the claim be 
compromised or settled, or the manner in which it 
shall be defended, is a matter of no concern to the 
insured.  However, where an injury occurs for which a 
recovery may be had in a sum exceeding the amount of 
the insurance, the interest of the insured becomes one 
of concern to him.  At this point a duty on the part 
of the insurer to the insured arises.  It arises 
because the insured has bartered to the insurance 
company all of the rights possessed by him to enable 
him to discover the extent of the injury and to 
protect himself as best he can from the consequences 
of the injury. . . .  
It is the right of the insurer to exercise its own 
judgment upon the question of whether the claim should 
be settled or contested. . . . [I]ts exercise of this 
right should be accompanied by considerations of good 
faith.  
Hilker, 204 Wis. at 14 (emphasis added).   
¶73 In the present case, Liberty Mutual relies heavily on 
the language in Hilker, which states that settlement within 
policy limits "is a matter of no concern to the insured" and 
that the insurance company's duty of good faith does not arise 
until "recovery may be had in a sum exceeding the amount of the 
insurance."     
¶74 We take these sentences in Hilker to be descriptive of 
the point at which the insured's "concern" accrued in the Hilker 
case and in the many fact situations of which the court was 
aware.  This statement observed, or assumed, that a settlement 
within policy limits would be "a matter of no concern" to the 
insured in that case.  Nothing in the Hilker decision or in the 
No. 
2008AP1303   
 
28 
 
briefs indicates that the insured had any other concern than 
that the claim would exceed the policy limits.  The Hilker court 
was not thinking about a claim within a deductible.    
¶75 We look to the reasoning of Hilker, not to a narrow 
reading of language specific to the facts of that case.  Hilker 
teaches that the duty of good faith arises when an insurance 
company has control over settlement and the interests of the 
insurance company and the insured are adverse.  These conditions 
emphasized in Hilker are met in the present case.   
¶76 In the present case, Roehl Transport's interest, its 
"concern," in the language of Hilker, is not only to avoid 
liability in excess of its coverage limits but also to limit any 
personal liability that arises from its deductible. Roehl 
Transport's interest in settlement under the deductible amount 
is comparable to the insured's concern in Hilker with a 
settlement in excess of policy limits.  
¶77 Simply put, it is a matter of concern to Roehl 
Transport whether the insurance company settles for less than 
policy limits and exposes Roehl Transport to liability within 
the amount of its deductible.  Roehl Transport's interest is in 
settling the claim for as little as possible below $500,000.  
Liberty Mutual, on the other hand, has little concern with the 
value of a claim settled below $500,000; its financial interest 
is in minimizing its costs in investigating and adjusting the 
claim and in keeping the settlement amount below $500,000.  The 
interests of Liberty Mutual and Roehl Transport are in conflict 
regarding payment of a claim below the sum of $500,000. 
No. 
2008AP1303   
 
29 
 
¶78 Thus in the present case, to use the rationale and 
words of Hilker, a duty on the part of Liberty Mutual to Roehl 
Transport arose when the claim was made because Roehl Transport 
had bartered to Liberty Mutual all the rights Roehl Transport 
possessed to protect itself as best it can from the consequences 
of the injury.  We read Hilker as supporting Roehl Transport's 
bad faith claim in the instant case. 
¶79 Later cases have reiterated Hilker's rationale for a 
bad faith claim in similar fact situations.  Cases have 
continued to explain the duty of an insurance company to 
exercise good faith when its actions effectively dispose of the 
assets of the insured.  Although this rationale is not limited 
to judgments or settlements in excess of the policy limits, 
third-party cases after Hilker have involved judgments in excess 
of liability limits and have included language focusing on the 
excess judgment as creating the insured's interest in the 
adjustment or settlement of a claim.30    
¶80 Yet bad faith claims have not been limited in 
Wisconsin to the fact situations in Wisconsin Zinc and Hilker.  
                                                 
30 See, e.g., Alt, 71 Wis. 2d at 349 (insurance company 
required to make a determination "whether the exposure may 
jeopardize the insured by being in excess of the policy 
limits"); Kranzush, 103 Wis. 2d at 60 ("if the insurer fails to 
settle a third-party claim within the limits of the policy and 
chooses instead to litigate the matter, the insured will be 
exposed to that portion of any judgment which exceeds the policy 
limits."); see also Huss, 735 F.2d at 250 (applying Wisconsin 
law) ("[A]ll Wisconsin reported decisions available to us which 
address third party claimants and subsequent disputes between 
the insured and insurer involve the insured's claim for excess 
judgment.") 
No. 
2008AP1303   
 
30 
 
Forty-seven years after Hilker, by which time third-party bad 
faith claims were well established, the court determined that a 
bad faith claim could lie in a first-party claim against an 
insurance company.     
¶81 In 
Anderson 
v. 
Continental 
Insurance 
Co., 
85 
Wis. 2d 675, 
271 
N.W.2d 368 
(1978), 
the 
insureds 
had 
a 
homeowner's policy and sought payments from the insurance 
company for fire damage.  They brought a bad faith claim against 
their insurance company, alleging that their insurance company's 
response to their claim for benefits was "wilful, fraudulent, 
intentional 
and 
in 
bad 
faith 
and 
for 
the 
purpose 
of 
discouraging, avoiding, or reducing the payment due under the 
terms of the policy."  Anderson, 85 Wis. 2d at 682. 
¶82 The insurance company moved to dismiss the bad faith 
claim, arguing that the Wisconsin Supreme Court had not 
previously allowed such a claim in an action brought by an 
insured against his own insurance company.  The Anderson court 
held that a first-party bad faith claim was cognizable in 
Wisconsin.  The court declared that "in every insurance 
contract, there is an implied covenant of good faith and fair 
dealing.  The duty to so act is imminent in the contract whether 
the company is attending to the claims of third persons against 
the insured or the claims of the insured itself."  Anderson, 85 
Wis. 2d at 689 (quoted source omitted).   
¶83 Adhering to the same reasoning used in the Hilker and 
Wisconsin Zinc cases, the Anderson court wrote as follows:  "By 
virtue of the relationship between the parties created by the 
No. 
2008AP1303   
 
31 
 
contract, a special duty arises, the breach of which duty is a 
tort and is unrelated to contract damages."  Anderson, 85 
Wis. 2d at 686.  Because Hilker's reasoning rested on a "duty on 
the insurance company . . . analogous to that of a fiduciary," 
the Anderson court concluded that the existence of this 
underlying duty of good faith also supported a first-party bad 
faith tort action.  Anderson, 85 Wis. 2d at 688.   
¶84 The 
Anderson case teaches that when considering 
whether the tort of bad faith is available in a factual 
situation different from that presented in Wisconsin Zinc and 
Hilker, the court is to return to the basic principles set forth 
in Hilker underlying the tort of bad faith.  An insurance 
company has a duty to the insured that is "analogous to that of 
a fiduciary"31 and "[e]very contract imposes upon each party a 
duty of good faith and fair dealing in its performance and its 
enforcement."32  
¶85 Following on the heels of Anderson came Coleman v. 
American Universal Insurance Co., 86 Wis. 2d 615, 273 N.W.2d 220 
(1979), once again raising the issue of whether a claimant in a 
novel situation had a cognizable claim in Wisconsin under the 
                                                 
31 Anderson, 85 Wis. 2d at 688. 
32 Id. at 688-89 (citing Restatement (Second) of Contracts 
§ 231 (1973)). 
"The rationale which recognizes an ancillary duty on an 
insurance 
company 
to exercise good faith . . . is equally 
applicable and of equal importance when the insured seeks 
payment of legitimate damages from his own insurance company."  
Anderson, 85 Wis. 2d at 689.  
No. 
2008AP1303   
 
32 
 
tort of bad faith.  In Coleman, an employee was injured in the 
course of his employment by an employer who was insured for 
worker's 
compensation. 
 
The 
employee 
received 
worker's 
compensation payments but then sued the worker's compensation 
insurance company for a separate injury for the insurance 
company's bad faith conduct in intentionally and maliciously 
withholding worker's compensation payments.   
¶86 The Coleman court declared that the "rationale of 
Anderson is applicable not only to the claim of a first-party 
insured against its insurance company, but is also applicable 
when the case involves a [victim's] claim against an insurer."33  
The court based its conclusion that a victim's bad faith claim 
against an insurance company was cognizable on the statutory 
system of ensuring that workers' injuries were compensated.   
¶87 The next significant case in which this court was 
asked to recognize a bad faith claim in a different factual 
                                                 
33 Coleman v. Am. Universal Ins. Co., 86 Wis. 2d 615, 620, 
273 N.W.2d 220 (1979). 
The law governing causes of action and remedies for bad 
faith in worker's compensation has changed since Coleman was 
decided.  Our concern in the present case is with the method of 
common-law analysis utilized in Coleman.  We in no way address 
the availability of any claim or remedy in worker's compensation 
cases.  See Aslakson v. Gallagher Bassett Servs., Inc., 2006 WI 
App 35, ¶10, 289 Wis. 2d 664, 711 N.W.2d 667 ("In response to 
Coleman, the 1979-80 Wisconsin Legislature adopted Wis. Stat. 
§ 102.18(1)(bp), which provides that the department may assess a 
penalty for bad faith in the handling of a worker's compensation 
claim and states that this penalty 'is the exclusive remedy 
against an employer of insurance carrier for malice or bad 
faith.'").     
No. 
2008AP1303   
 
33 
 
situation was Kranzush v. Badger State Mutual Casualty Co., 103 
Wis. 2d 56, 307 N.W.2d 256 (1981).  In Kranzush, a claimant 
asked the court to extend Coleman to a non-worker's compensation 
case, arguing that an injured victim (a third party to the 
insurance policy) had a bad faith claim against the insurance 
company in a non-worker's compensation case.   
¶88 In Kranzush, the victim in an auto accident filed a 
suit against the tortfeasor's insurance company, alleging that 
the company's conduct in handling the victim's claim against the 
insured allowed recovery in a suit for bad faith.  The insurance 
policy was a contract between the tortfeasor and the insurance 
company.  No insurance policy or contractual relationship 
existed between the victim and the insurance company.   
¶89 The Kranzush court first outlined the three situations 
in which the case law had already recognized a bad faith claim 
against an insurance company:  (1) an insured's claim against 
the insurance company, as in Hilker, for failing to exercise 
good faith in the settlement of the claim of a third party 
"which arises by virtue of the contractual relationship of the 
insurer and the insured . . . ."  (2) an insured's claim against 
his or her insurance company for its "handling of an insured's 
claim 
under 
a 
casualty, 
life, 
health, 
or 
accident 
policy . . . exemplified by Anderson v. Continental Ins. Co."; 
and  (3) "in the handling of a worker's claim for benefits under 
a worker's compensation policy," as recognized in Coleman. 
Kranzush, 103 Wis. 2d at 60-62.   
No. 
2008AP1303   
 
34 
 
¶90 The facts in the Kranzush case came closest to the 
type of bad faith claim recognized in Coleman:  a victim sued 
the tortfeasor's insurance company for bad faith.  The Kranzush 
court 
distinguished 
Coleman 
on 
the 
ground 
that 
worker's 
compensation provided guaranteed coverage and swift payment to 
worker-victims, while a tort victim of an auto accident "is not 
the object of a sweeping statutory scheme designed to promote 
the 
compensation 
of 
injuries 
in 
a 
routine, 
largely 
nonadversarial manner."  Kranzush, 103 Wis. 2d at 65.   
¶91 The 
Kranzush 
court 
then 
considered 
whether 
to 
recognize a bad faith right of action and determined it would 
not.  Citing numerous cases and resting on the rationale set 
forth in Hilker and Anderson, the court identified a constant 
theme in bad faith cases: an insurance company owes a duty of 
good faith to the insured but owes no duty to the victim to 
settle or to negotiate in good faith.  Kranzush, 103 Wis. 2d at 
72-73.   
¶92 The duty of good faith arises under the insurance 
policy and the contractual relationship formed between the 
insurance company and the insured.  This duty is owed to the 
insured, not to a third-party claimant.  Absent this underlying 
duty of good faith flowing from the insurance company to the 
claimant, the Kranzush court determined that a bad faith claim 
could not be recognized.  Kranzush declared that allowing a 
victim to assert a bad faith claim under the circumstances 
"would constitute a serious and unprecedented departure from 
established tort principles."  Kranzush, 103 Wis. 2d at 73.  
No. 
2008AP1303   
 
35 
 
¶93 Liberty Mutual relies on Kranzush for the proposition 
that the three identified situations in which bad faith claims 
have been recognized are the only available bad faith claims.  
Liberty Mutual reads more into Kranzush than the opinion says 
and far more than it implies.  In fact, by addressing at length 
whether a bad faith claim should be recognized in this fourth 
situation, Kranzush clearly implies that the three instances in 
which bad faith claims have previously been recognized are not 
exclusive.  Rather, like Anderson and Coleman before it, 
Kranzush teaches that each situation must be analyzed in light 
of the principles recognized in past cases to determine whether 
a claimant can bring a bad faith claim against an insurance 
company.   
¶94 Here, Liberty Mutual appears to concede that it owed  
a duty of good faith to Roehl Transport in the adjustment of 
third-party claims against Roehl Transport.  Nevertheless, 
Liberty Mutual asserts that the existence of the duty of good 
faith does not give rise to a corresponding cause of action for 
bad faith when the duty is breached but policy limits are not 
exceeded.  We do not accept this argument.   
¶95 We are not persuaded by Liberty Mutual's argument that 
allowing a bad faith claim in the instant case will necessarily 
"open the floodgates" to a great volume of wasteful or frivolous 
claims against insurance companies.  The fact that a previous 
case involving the loss of the insured's deductible has not 
already been presented undermines Liberty Mutual's argument.  
Moreover, we rejected the same argument when we recognized a 
No. 
2008AP1303   
 
36 
 
first-party bad faith claim for the first time in Anderson, 
stating that "[i]nsurers in Wisconsin need not be mulcted by 
extortionate or questionable claims if they adhere to the 
standards of care which we have set forth . . . ."34   
¶96 Anderson, Coleman, and Kranzush lead to the conclusion 
that we must examine the situation presented in light of the 
principles and rationale established in our previous cases.  
Applying the principles and rationale of bad faith cases in 
Wisconsin compels the conclusion that Roehl Transport may bring 
a bad faith tort claim against Liberty Mutual for breach of its 
duty of good faith when Roehl Transport's interests, namely 
Roehl Transport's exposure of its substantial deductible, were 
within Liberty Mutual's control. 
¶97 Liberty Mutual also relies on A.W. Huss Co. v. 
Continental Casualty Co., 735 F.2d 246 (7th Cir. 1984), applying 
Wisconsin law, to conclude that no claim of bad faith is 
cognizable when the settlement does not exceed the policy 
limits.  In Huss, the insured had an automobile liability policy 
with a limit of $100,000 and an umbrella excess policy with a 
limit of $1,000,000.  The insurance company investigated the 
claim against the insured and began settlement negotiations.  It 
also advised the insured, in standard language, that the insured 
had the option of retaining counsel in connection with the case.   
¶98 The insurance company ultimately settled the claim for 
$1,100,000, the total policy limits.  The insured believed that 
                                                 
34 Anderson, 85 Wis. 2d at 694. 
No. 
2008AP1303   
 
37 
 
the insurance company had not settled the matter quickly enough 
and sued the insurance company for bad faith, seeking damages 
for anxiety, business loss, attorney fees allegedly incurred in 
monitoring the insurance company's handling of the claim and in 
prosecuting the bad faith action, as well as punitive damages. 
¶99 The question presented to the federal court was 
whether "Wisconsin law recognizes a cause of action by the 
insured against the insurer for alleged bad faith in handling a 
third party claim where the insurance company settled the claim 
within the insured's policy coverage."35  The federal court 
answered this question in the negative.    
¶100 In response to the insured's argument that the federal 
court should accept the insured's claim of bad faith as a fourth 
category of bad faith claims, the federal court begged off.  The 
federal court stayed within the three fact situations previously 
recognized in Wisconsin bad faith law.  The court asserted that 
as a federal court in a diversity case applying Wisconsin law, 
it had limited discretion to recognize "untested legal theories 
brought under the rubric of state law."  Huss, 735 F.2d at 253.   
¶101 Despite its reluctance to recognize a bad faith tort 
in the novel fact situation presented, the federal court went on 
to conclude that even if the insured's proposed bad faith claim 
were to be recognized, the tort would not apply to the facts in 
Huss.  The court concluded that the insurance company "exceeded 
                                                 
35 Huss, 735 F.2d at 247. 
No. 
2008AP1303   
 
38 
 
its obligation to defend the insured zealously . . . ."  Huss, 
735 F.2d at 255. 
¶102 In Huss, the federal court emphasized the excess over 
policy limits as its guiding theory in analyzing bad faith 
claims, rather than the conflict between the insured and 
insurance company.  This approach is understandable because in 
the Huss case, no conflict between the insured and insurance 
company occurred as long as the settlement was within policy 
limits.  Huss does not govern the present case, in which the 
interests of the insured and the insurance company were in 
conflict.   
¶103 Furthermore, Huss was decided before United Capitol 
Insurance Co. v. Bartolotta's Fireworks Co., 200 Wis. 2d 284, 
546 N.W.2d 198 (Ct. App. 1996).  There, a "specially tailored" 
insurance policy included a "self insurance" provision requiring 
the insured, Bartolotta's Fireworks, to pay the first $25,000 of 
claims. 
The 
self-insured 
provision 
is 
analogous 
to 
the 
deductible in the present case, making Bartolotta's Fireworks 
important in our analysis of whether the instant case presents a 
cognizable bad faith claim.   
¶104 The policy in Bartolotta's Fireworks had a standard 
clause giving the insurance company the right to settle claims. 
The insurance company settled a victim's claim against the 
insured 
for 
$35,000, 
within 
the 
policy 
limits, 
without 
consulting the insured.   
¶105 The 
insurance company argued, as Liberty Mutual  
argues here, that "a bad faith cause of action does not even 
No. 
2008AP1303   
 
39 
 
exist in a case where a settlement was made within policy 
limits."36   
¶106 In response, the insured conceded that "virtually all 
other reported cases deal with the insured's personal exposure 
in excess of liability limits" but argued that in its case the 
insurance company's good faith obligation "as to settlement 
discussions which expose the insured's personal assets is no 
less compelling."37  Bartolotta's Fireworks relied on cases from 
other jurisdictions concluding that a bad faith claim may lie 
when a settlement within policy limits nevertheless exposes the 
insured's deductible or other assets.38 
¶107 Thus the court of appeals was directly confronted with 
the question whether a bad faith claim was cognizable in 
Wisconsin when settlement was reached within policy limits but 
the interests of the insured were at risk because of the self-
insurance (deductible) provision.  
¶108 The court of appeals recognized the bad faith claim as 
cognizable under Wisconsin law.  The court of appeals stated 
that "[t]he duty of good faith serves to balance the interests 
                                                 
36 Response Brief of Plaintiff-Respondent-Cross Appellant, 
United Capitol Ins. Co., at 17 (citing Am. Home Assurance Co. v. 
Hermann's Warehouse Corp., 521 A.2d 903 (N.J. 1987)). 
37 Brief 
and 
Appendix 
of 
Appellant-Cross 
Respondent 
[Bartolotta's Fireworks Co., Inc.] at 22. 
38 Brief 
and 
Appendix 
of 
Appellant-Cross 
Respondent 
[Bartolotta's Fireworks Co., Inc.] at 16-19 (citing St. Paul 
Fire & Marine Ins. Co. v. Edge Mem'l Hosp., 584 So. 2d 1316 
(Ala. 1991); Nat'l Serv. Indus. v. Hartford Accident & Indem. 
Co., 661 F.2d 458 (5th Cir. 1981)). 
No. 
2008AP1303   
 
40 
 
of the insured against its insurer, which may be tempted to 
avoid the costs of defense via a quick settlement and thereby 
sacrificing the insured's deductible."39   
¶109 Ultimately the court of appeals concluded that the 
insurance company had not acted in bad faith.  The court of 
appeals declared that it "cannot say that [the insurance 
company] acted in bad faith by striking when the iron was hot 
and moving this case to settlement" when the insurance company 
"had the authority to investigate, value, and settle any claim, 
and did so."  Bartolotta's Fireworks, 200 Wis. 2d at 297.  
"Striking while the iron was hot" is, in short, what Roehl 
Transport argues that Liberty Mutual failed to do in the present 
case.   
¶110 Had the court of appeals reached the conclusion that 
no claim for the tort of bad faith could be asserted, it would 
not have gone on to determine whether the facts were sufficient 
to support the allegation of bad faith.40  The bad faith claim 
                                                 
39 United Capitol Ins. Co. v. Bartolotta's Fireworks Co., 
200 Wis. 2d 284, 296, 546 N.W.2d 198 (Ct. App. 1996) (citing 
Mowry, 129 Wis. 2d at 509-10 (emphasis added)). 
40 In Anderson, the court relied on exactly this reasoning 
in its analysis of Drake v. Milwaukee Mutual Insurance Co., 70 
Wis. 2d 977, 236 N.W.2d 204 (1975): 
Had the court reached the conclusion that, under no 
set of pleadings, a claim for what it called a 
tortious breach of contract could be asserted against 
an insurer, it would not have proceeded to determine 
whether the facts were sufficient to state that cause 
of action, but it did just that.  The claim of 
tortious breach of contract was thrown out, not 
because such a claim could not be asserted under 
No. 
2008AP1303   
 
41 
 
was thrown out not because the settlement was within policy 
limits but because the facts before the court were insufficient 
to support an allegation of bad faith conduct.    
¶111 We read 
Bartolotta's Fireworks to support Roehl 
Transport's claim.  The court of appeals in Bartolotta's 
Fireworks faced a claim of bad faith for a settlement that was 
within policy limits but also exposed the insured to financial 
risk on its "self insurance."  The court of appeals treated the 
allegations of the bad faith claim in Bartolotta's Fireworks as 
it would have treated a settlement in excess of policy limits.   
¶112 We apply the same rationale in the present case as the 
court of appeals utilized in Bartolotta's Fireworks.  When a 
conflict exists between the interests of an insurance company 
and the interests of an insured, and the insurance company has 
control over the claim, the insurance company has a duty to act 
in good faith to protect the interests of the insured.  When an 
insurance company breaches that duty, a cause of action for bad 
faith is cognizable in Wisconsin. 
¶113 Our study of the development of the doctrine of bad 
faith in insurance claims in Wisconsin case law demonstrates 
                                                                                                                                                             
Wisconsin law against an insurer, but because the 
facts pleaded were insufficient.   
Anderson, 85 Wis. 2d at 685. 
In other words, a court that considers whether the facts 
alleged are sufficient to support the stated cause of action 
implicitly acknowledges that the cause of action is potentially 
viable.  
No. 
2008AP1303   
 
42 
 
that the tort of bad faith has been developing in Wisconsin case 
law and that Roehl Transport's bad faith claim is supported by 
the doctrine developed in our previous decisions. 
D 
¶114  Each party cites cases from other jurisdictions to 
support its position.  Only a few state courts have addressed 
the issue the instant case presents.  The cases from other 
jurisdictions are not in agreement about recognizing a bad faith 
claim in situations comparable to the instant case.  Cases in 
several jurisdictions appear to recognize a bad faith claim when 
the insured's deductible, which is less than the policy limits, 
may be at risk.41  Other cases appear to conclude that when a 
                                                 
41 See, e.g., Commerce & Indus. Ins. Co. v. N. Shore Towers 
Mgmt. Inc., 162 Misc. 2d 778, 781 (N.Y. City Civ. Ct. 1994) 
("[T]here is also compelling authority that a bad faith claim 
may be raised as to an insurer's settlement within policy limits 
which causes the insured to become liable for a deductible."); 
Guarantee Ins. Co. v. City of Long Beach, 106 A.D.2d 428, 428-29 
(N.Y. App. Div. 1984) (setting forth bad faith standard for 
claim against insurance company settling within limits and 
forcing insured to pay deductible), overruled on other grounds 
by Pavia v. State Farm Mut. Auto. Ins. Co., 626 N.E.2d 24 (N.Y. 
1993) (bad faith standard in Long Beach case too demanding for 
policyholder); Rocor Int'l, Inc. v. Nat'l Union Fire Ins. Co., 
966 S.W.2d 559, 562 (Tex. Ct. App. 1998) (insurance company owes 
insured a duty to handle claims against it in such a way as to 
minimize" the insured's liability and damages in its finances); 
Orion Ins. Co. v. Gen. Elec. Co., 493 N.Y.S.2d 397, 455 (N.Y. 
Sup. Ct. 1985), aff'd by U.S. Aviation Underwriters, Inc. v. 
Gen. Elec. Co., 509 N.Y.S.2d 778 (N.Y. App. Div. 1986) (court 
tacitly recognized validity of an insured's cause of action for 
bad faith notwithstanding the absence of liability in excess of 
limits).  
Ashley, supra note 13, § 4:22 at 4-78 to 4-79, comments on 
the Orion case as follows:  
No. 
2008AP1303   
 
43 
 
liability policy contains a deductible clause along with a 
clause granting an insurance company an unfettered right to 
settle, the insured has bargained away any rights to protest how 
the insurance company disposes of the insured's deductible.42     
¶115 After examining the Wisconsin case law and the cases 
from other jurisdictions, we conclude that the Wisconsin case 
law has never declared that the three previously recognized 
                                                                                                                                                             
Later courts have incorrectly read Orion as rejecting 
the notion that an insurer may incur liability for bad 
faith based on the insurer's decision to accept a 
settlement offer within the policy limits.  This 
confusion 
probably stems from the Orion court's 
invocation of New York's narrow definition of bad 
faith.  The possibility of unfair settlements of 
meritless 
cases 
under 
high-deductible 
policies 
certainly seems to implicate the cause of action for 
bad faith and raises the issue how one might address 
the 
problem 
in 
the 
majority 
of 
American 
jurisdictions . . . . 
 
 . . . . 
The New York court correctly perceived that the facts 
at least raised an issue as to [the insurance 
company's] bad faith . . . . "[T]he inquiry must be 
akin to that undertaken in a case where an insurer is 
sued for a bad-faith refusal to settle."   
See also Jon Epstein, Liability of Insurer to Insured for 
Settling Third-Party Claim Within Policy Limits Resulting in 
Detriment 
to 
Insured, 
18 
A.L.R. 
5th 
474, 
§ 8[a] 
(1994) 
(collecting cases). 
42 Liberty Mutual cites American Protection Insurance Co. v. 
Airborne, Inc., 476 F. Supp. 2d 985, 995 (N.D. Ill. 2007) (court 
rejected bad faith claim, noting that "[w]hile [the insured] 
certainly risked significant personal liability in this case 
because of the large deductible, that risk was exactly what it 
had contracted for.").  See also Epstein, supra note 41, § 8[b] 
(collecting cases). 
No. 
2008AP1303   
 
44 
 
situations giving rise to bad faith claims are the only bad 
faith claims cognizable in Wisconsin.  We further conclude that 
Roehl Transport, which has a policy with a deductible, has 
stated a cognizable bad faith claim against its insurance 
company, Liberty Mutual, when the company exercised control over 
the settlement of a third-party claim against Roehl Transport 
and the verdict in the underlying liability case imposed 
personal liability on Roehl Transport but was within the policy 
limits.   
¶116 We now determine whether the jury's verdict in favor 
of Roehl Transport's bad faith claim was supported by credible 
evidence.   
III 
¶117 Liberty Mutual asserts that there is no credible 
evidence for a finding of bad faith.  Liberty Mutual argues (A) 
that the jury instruction required the jury to find "dishonesty 
and deceit" to conclude that Liberty Mutual had acted in bad 
faith and that no credible evidence supported the jury's finding 
of bad faith when evaluated against this "dishonesty or deceit" 
standard; and (B) that neither the injured victim, Arthur Groth, 
nor the President of Roehl Transport, Everett Roehl, the persons 
who had authority to settle Groth's claim, testified at trial, 
and that without such testimony Roehl Transport could not prove 
that the Groth claim could have been settled. 
¶118 A jury verdict "will not be upset if there is any 
credible evidence to support it.  The evidence will be viewed in 
No. 
2008AP1303   
 
45 
 
the light most favorable to the verdict."43  Assessment of the 
credibility of the witnesses and the weight afforded their 
testimony is left to the jury; when more than one reasonable 
inference may be drawn from the evidence, reviewing courts 
accept the inferences that the jury has drawn.44  It is this 
court's task to look for credible evidence to sustain the jury's 
verdict, not to search the record for evidence that might have 
supported a result contrary to the jury's verdict.45 
¶119 We address each of Liberty Mutual's two arguments 
challenging the jury verdict and conclude that sufficient 
                                                 
43 Johnson v. Am. Family Mut. Ins. Co., 93 Wis. 2d 633, 644, 
287 N.W.2d 729 (1980).  See also Helmbrecht v. St. Paul Ins. 
Co., 122 Wis. 2d 94, 109, 362 N.W.2d 118 (1985). 
Wisconsin Stat. § 805.14(1) provides: 
Test of sufficiency of evidence. No motion challenging 
the sufficiency of the evidence as a matter of law to 
support a verdict, or an answer in a verdict, shall be 
granted 
unless 
the 
court 
is 
satisfied 
that, 
considering 
all 
credible 
evidence 
and 
reasonable 
inferences therefrom in the light most favorable to 
the party against whom the motion is made, there is no 
credible evidence to sustain a finding in favor of 
such party.   
44 Millonig v. Bakken, 112 Wis. 2d 445, 451, 334 N.W.2d 80, 
83 (1983) ("Even if the evidence adduced is undisputed, if that 
evidence permits different or conflicting inferences, a verdict 
should not be directed; and upon review after verdict, a court 
is obliged to accept the one adopted by the jury.  Thus, it is 
only in the most unusual case that a jury's verdict will be 
upset" (internal citations omitted).). 
45 Fehring v. Republic Ins. Co., 118 Wis. 2d 299, 305-306, 
347 N.W.2d 595 (1984), overruled on other grounds by DeChant v. 
Monarch Life Ins. Co., 200 Wis. 2d 559, 576, 547 N.W.2d 592 
(1996). 
No. 
2008AP1303   
 
46 
 
credible evidence was presented at trial to support the jury's 
finding of bad faith.  
A 
¶120 Liberty 
Mutual 
does 
not 
challenge 
the 
jury 
instructions on bad faith as erroneous and does not contest the 
adequacy 
of the verdict form.46  Rather, Liberty Mutual 
interprets the jury instructions as requiring the jury to find 
that Liberty Mutual made a dishonest decision.  Liberty Mutual 
then argues that no credible evidence was presented that it 
engaged in dishonest or deceitful conduct. 
¶121 "A circuit court has wide discretion as to the 
instructions and special verdicts given to a jury, provided that 
they adequately cover the law applicable to the facts."47  
Crafting the content of a special verdict and instruction falls 
within the discretion of the circuit court, and the exercise of 
discretion will not be disturbed on review if all material 
issues of fact are covered by appropriate questions and the form 
correctly and adequately covers the law that applies to the 
case.48   
                                                 
46 The circuit court modified pattern instruction Wis JI——
Civil 2760, "Bad Faith by Insurance Company (Excess Verdict 
Case)," to remove references to a judgment above policy limits 
and to focus the bad faith inquiry on Liberty Mutual's "failure 
to settle" the Groths' claim. 
47 Vogel v. Grant-Lafayette Elec. Co-op., 201 Wis. 2d 416, 
422, 548 N.W.2d 829 (1996).   
48 Stuart v. Weisflog's Showroom Gallery, Inc., 2008 WI 22, 
¶12, 308 Wis. 2d 103, 115, 746 N.W.2d 762. 
No. 
2008AP1303   
 
47 
 
¶122 In protesting the sufficiency of the evidence, Liberty 
Mutual focuses narrowly on a single sentence in the lengthy jury 
instructions on bad faith:  "The term 'bad faith' carries with 
it the suggestion of dishonest or deceitful conduct."  Liberty 
Mutual reads too much into this phrase.  The instructions, which 
adapted Wis JI——Civil 2760, are in keeping with the case law.49  
Liberty 
Mutual 
does 
not 
argue 
otherwise 
or 
attack 
the 
instruction viewed as a whole.   
¶123 Viewing the jury instruction as a whole, we conclude 
that the jury was properly instructed.  The somewhat lengthy 
jury instruction included language taken from the pattern 
instruction and from prior cases.  The jury was instructed that 
bad faith carries with it a suggestion of dishonesty.50   
¶124 The jury was also instructed that "'[B]ad faith' is a 
term of broad application, and it is sometimes difficult to 
                                                 
49 Our cases have defined bad faith by reference to "deceit; 
duplicity; insincerity."  Anderson, 85 Wis. 2d at 691.  The 
cases characterize bad faith as "a species of fraud."  Nichols 
v. U.S. Fid. & Guar. Co., 37 Wis. 2d 238, 243, 155 N.W.2d 104 
(1967).  We have said that "the knowing failure to exercise an 
honest and informed judgment constitutes the tort of bad faith," 
Anderson, 
85 
Wis. 2d 
at 
692, 
and 
that 
"[t]he 
insurance 
company, . . . to be liable, need not be found to have committed 
fraud or to have acted dishonestly . . . ."  Alt, 71 Wis. 2d at 
354.  A jury may properly conclude that an insurance company's 
"massive failure" to carry out its identified duties constitutes 
a "'suggestion of dishonesty' or 'a species of fraud,' within 
the meaning of 'bad faith.'"  Baker v. N.W. Nat'l Cas. Co. 
(Baker II), 26 Wis. 2d 306, 315, 132 N.W.2d 493 (1965). 
50 See Baker II, 26 Wis. 2d at 316 ("[T]he insurer was amply 
protected by the instructions that bad faith 'carries with it a 
suggestion of dishonesty' and is 'a species of fraud.'").   
No. 
2008AP1303   
 
48 
 
exactly define within the framework of every case"; that the 
jury must "consider whether the company, in failing to perform 
the duties it owed to Roehl Transport[,] demonstrated a 
significant disregard of Roehl Transport's rights and economic 
interests"; that the company's "decision not to settle should be 
an honest one, taking into consideration both the interests of 
the company and the interests of the insured;" that the 
company's "[negligence] alone is not enough to show the company 
acted in bad faith"; that the jury is to "consider the totality 
of the insurance company's decisions in the handling of the 
injured party's claim to determine whether those decisions were 
intellectually honest and reasonable"; that if the jurors 
determine that the company's decisions "were not honest and 
reasonable decisions, then the company may be said to have acted 
in bad faith"; and that if the jurors "conclude that important 
facts were recklessly ignored and disregarded during Liberty 
Mutual's adjustment of the claim, then the company may be said 
to have acted in bad faith." 
¶125 We conclude that the jury verdict was entered in 
response to proper jury instructions.  We do not accept Liberty 
Mutual's conclusion that the instructions required a specific 
finding of deceit or dishonesty.   
¶126 The trial on the issue of bad faith lasted eight days.  
The jury was instructed that Roehl Transport bore the burden of 
showing 
bad 
faith 
to 
a 
reasonable 
certainty 
by 
clear, 
satisfactory, and convincing evidence.   
No. 
2008AP1303   
 
49 
 
¶127 We need not review every detail of the extensive 
record.  We need state only that a review of the record shows 
that a jury could conclude from the evidence that Liberty 
Mutual's decisions demonstrated a significant disregard of Roehl 
Transport's rights and economic interests and were not honest.  
The 
evidence 
showed 
that 
Liberty 
Mutual 
employed 
claims 
personnel on the Groth claim who had little training or 
experience with trucking claims; that there was high turnover in 
staffing the Groth claim; that Liberty Mutual failed to 
adequately supervise the staff's handling of the claim; that the 
investigation of the accident and Groth's injuries and medical 
condition was inadequate; that the insurance company mishandled 
the independent medical examination so that the extent of injury 
and disability liability attributed to Roehl Transport was 
exaggerated; that Liberty Mutual made no attempt to settle 
Groth's claims when it had the opportunity to do so; and that 
Liberty Mutual failed to retain experts, including an accident 
reconstructionist, who could have provided evidence limiting 
Roehl Transport's liability to Groth.   
¶128 From this evidence, the jury could reasonably conclude 
that Liberty Mutual exhibited a significant disregard of Roehl 
Transport's interests with the consequence that important 
actions to protect Roehl Transport's interests were not taken, 
and that the decisions made in handling the Groth claim were not 
honest.  Credible evidence exists to support the jury verdict.  
No. 
2008AP1303   
 
50 
 
¶129 While 
Liberty 
Mutual 
points 
to 
evidence 
that 
contradicts the jury's finding, the jury was free to rely on the 
evidence it found most credible.  
B 
¶130 Liberty Mutual also argues that neither Arthur Groth, 
the injured victim, nor Everett Roehl, the president of Roehl 
Transport, the only persons who had authority to settle Groth's 
claim, testified at trial, and that without the testimony of 
these persons Roehl Transport could not prove that the Groth 
claim "could have settled" for $100,000. 
¶131 Liberty Mutual argues that no settlement could be 
reached unless these two persons agreed to it and that although 
Roehl Transport argued that the case should have settled for 
$100,000 in February 2001, it provided no evidence that Arthur 
Groth would have accepted that sum.    
¶132 One of Roehl Transport's expert witnesses, Thomas 
Thibodeau, an attorney with over forty years' experience in 
trucking accident and insurance matters, testified that based on 
his experience and his review of the Groth case, the estimated 
settlement value of the case was "certainly under" $100,000, 
that Liberty Mutual should have been willing to pay $100,000 to 
settle the claim before the personal injury lawsuit was 
initiated, 
and 
that 
Liberty 
Mutual 
"disregarded 
Roehl's 
interest" in failing to get the case resolved for $100,000.   
¶133 Roehl Transport's other expert witness, Donald Downey, 
was an experienced claims manager in the trucking industry.  Mr. 
Downey testified that the nature of Liberty Mutual's request for 
No. 
2008AP1303   
 
51 
 
medical records from Groth's attorney was "quite burdensome" and 
"off-putting" and that it was "shooting yourself in the foot" 
for an insurance company to refuse to review medical information 
before the plaintiff finished treating for his injuries, as 
Liberty Mutual had done here.  Mr. Downey opined that Liberty 
Mutual did not make reasonable efforts to obtain medical 
information from Groth, at least in part because Liberty 
Mutual's staff was inexperienced.   
¶134 In Mr. Downey's opinion, Liberty Mutual could have 
settled the claim for $100,000, and the company should have 
attempted a settlement in that amount.  Mr. Downey opined that 
it was "pretty clear" that Liberty Mutual's errors and omissions 
had caused damage to Roehl Transport and further that Liberty 
Mutual had demonstrated a significant disregard for Roehl's 
interests. 
¶135 Ardell Skow, Arthur Groth's attorney in the personal 
injury suit against Roehl Transport, refused to comment on the 
specifics of his analysis of Mr. Groth's claim because of the 
attorney-client privilege.  Nevertheless, he responded to a 
hypothetical with facts similar to Groth's claim.  Relying on 
his experience, he opined that a reasonable settlement value for 
the hypothetical claim would be $103,000 to $133,000.    
¶136 Liberty 
Mutual's 
own 
adjuster, 
Nicole 
Bartunek, 
testified that a claim like Groth's settles 99 percent of the 
time for under $100,000.  
¶137 Liberty Mutual argues that absent testimony from the 
two parties authorized to settle the Groth claim——Arthur Groth 
No. 
2008AP1303   
 
52 
 
and Everett Roehl——the jury could not reasonably conclude that 
the Groth claim could have been settled, and therefore that the 
evidence cannot support the verdict.   
¶138  Although Groth's and Roehl's testimony may have been  
relevant, Roehl Transport was not required to seek their 
testimony, and their testimony was not necessary in order for a 
jury to find that Liberty Mutual acted in bad faith and damaged 
Roehl Transport.  Sufficient credible evidence was presented 
from which the jury could conclude that Liberty Mutual committed 
bad faith in failing to settle the Groth claim for a value 
within Roehl Transport's $500,000 deductible.  
¶139 Although Liberty Mutual points to evidence that might 
undermine or contradict the jury's finding, the jury was 
entitled to rely on the evidence it found most credible and 
persuasive.  The circuit court properly denied Liberty Mutual's 
motion challenging the jury's verdict. 
IV 
¶140 We 
next 
examine 
Liberty 
Mutual's 
argument 
that 
judicial public policy considerations bar Roehl Transport's bad 
faith claim based on expert testimony regarding what the 
underlying Groth claim "could have settled for."  Liberty Mutual 
raised this issue on motion for summary judgment in the circuit 
court.  The circuit court denied the motion.  Liberty Mutual 
raises this issue in this court.  Application of judicial public 
policy considerations is a question of law for this court to 
No. 
2008AP1303   
 
53 
 
decide independently, benefiting from the analysis of the 
circuit court.51 
¶141 Liberty Mutual argues that judicial public policy 
considerations preclude liability in the present case even if 
the court decides that the jury verdict was not flawed.  The 
court has applied judicial public policy considerations in tort 
cases based on negligence to bar liability, recognizing that 
"cases in which a causally negligent tortfeasor is relieved of 
liability [on judicial public policy grounds] are infrequent and 
present unusual and extreme considerations."52  
¶142 The court has denied recovery in negligence cases 
based on the following judicial public policy considerations: 
1. The injury is too remote from the negligence; 
2. The injury is too wholly out of proportion to the 
culpability of the negligent tortfeasor; 
3. In retrospect it appears too highly extraordinary that 
the negligence should have brought about the harm; 
4. Allowance of recovery would place too unreasonable a 
burden on the negligent tortfeasor; 
                                                 
51 Coffey v. City of Milwaukee, 74 Wis. 2d 526, 541, 247 
N.W.2d 132 (1976). 
52 Schlomer by Bye v. Perina, 169 Wis. 2d 247, 253, 485 
N.W.2d 399 (1992) (citing Steward v. Wulf, 85 Wis. 2d 461, 271 
N.W.2d 79, 88 (1978)).  See also Bowen v. Lumbermens Mut. Cas. 
Co., 183 Wis. 2d 627, 644 n.12, 517 N.W.2d 432 (1994) (courts 
bar liability on public policy grounds "in cases so extreme that 
it would shock the conscience of society to impose liability"). 
No. 
2008AP1303   
 
54 
 
5. Allowance of recovery would be too likely to open the 
way for fraudulent claims; or 
6. Allowance of recovery would enter a field that has no 
sensible or just stopping point.53 
¶143 In support of its argument that we should apply 
judicial public policy to relieve it of liability for bad faith, 
Liberty Mutual relies principally on Schlomer by Bye v. Perina, 
169 Wis. 2d 247, 485 N.W.2d 399 (1992), a legal malpractice case 
in which this court foreclosed the attorney's liability on 
judicial public policy grounds.   
¶144 In Schlomer, an injured child was represented for 
approximately three years by an attorney who did not settle the 
claim or file a lawsuit.  Schlomer, 169 Wis. 2d at 250.  A 
second attorney took over the case, filed suit in federal court 
and negotiated a structured settlement with an estimated value 
of more than $1 million.  The child then brought a malpractice 
action against the first attorney for failing to conclude the 
case.   
¶145 The jury found that the first attorney had been 
negligent in neglecting the claim, that the claim diminished in 
value during the period of neglect, and that the attorney's 
neglect denied the child the ability to invest funds from his 
settlement.  Schlomer, 169 Wis. 2d at 249.  The circuit court 
awarded damages representing the difference between the amount 
                                                 
53 See Coffey, 74 Wis. 2d at 541 (quoting Hass v. Chicago & 
N.W. Ry. Co., 48 Wis. 2d 321, 179 N.W.2d 885 (1970)). 
No. 
2008AP1303   
 
55 
 
the client "would have recovered" if not for the lawyer's 
negligent actions and the settlement entered, plus an amount for 
the lost use of funds in the intervening period.  Schlomer, 169 
Wis. 2d at 251. 
¶146 The court of appeals reversed the judgment, concluding 
that judicial public policy considerations preclude an award for 
the loss of a larger settlement.  There is "no just or sensible 
stopping point" as to each of the three elements of the child's 
cause of action: negligence, causation, and damages.  Schlomer, 
169 Wis. 2d at 249, 252.   
¶147 The Wisconsin Supreme Court affirmed the decision of 
the court of appeals but rested its decision on different 
judicial public policy considerations.  The supreme court 
reasoned that recovery must be denied on judicial public policy 
grounds because the injury is "too remote from the negligence" 
and "too out of proportion to the culpability of the negligent" 
lawyer.  Schlomer, 169 Wis. 2d at 249, 254.   
¶148 The supreme court stated that "[d]elay by an attorney 
alone cannot cause damages unless it is probable that it caused 
the loss of a witness, passing of a statute of limitations or 
similar results."  Schlomer, 169 Wis. 2d at 253.  The court 
concluded there was no proof that the insurance carrier would 
have settled the case earlier than it did.  Without evidence 
about "what the parties would have settled for," the supreme 
court declared that the jury verdict had been based entirely on 
speculation.    
No. 
2008AP1303   
 
56 
 
¶149 Schlomer is distinguishable from the instant case.  
Schlomer is a negligence case, as are the other cases Liberty 
Mutual cites to support its judicial public policy argument.54   
¶150 Liberty Mutual suggests that the same judicial public 
policy analysis applies to any "action sounding in tort."55  The 
cases cited do not espouse or support such a general rule.  
Wisconsin courts have generally applied the six well-established 
judicial public policy factors to delineate liability in 
negligence cases.56  Indeed, five of the six public policy 
considerations 
are 
stated 
in 
reference 
to 
a 
negligent 
tortfeasor.   
¶151 The tort of bad faith in the present case rests on a 
breach of good faith, not on negligence.57  Liberty Mutual cites 
no bad faith case in which the court has applied these judicial 
public policy factors.  We have not found any.  
¶152 We need not determine in the present case whether some 
or all of the traditional judicial public policy considerations 
                                                 
54 See Brief of Defendant-Cross Appellant at 32-35 (citing 
Schlomer by Bye v. Perina, 169 Wis. 2d 247, 485 N.W.2d 399 
(1992); Morgan v. Penn. Gen. Ins. Co., 87 Wis. 2d 723, 735, 275 
N.W.2d 660 (1979); Coffey, 74 Wis. 2d at 541). 
55 Brief of Defendant-Cross Appellant at 32. 
56 See, e.g., Behrendt v. Gulf Underwriters Ins. Co., 2009 
WI 71, ¶28, 318 Wis. 2d 622, 768 N.W.2d 568; Stephenson 
Universal Metrics, 2002 WI 30, ¶43, 251 Wis. 2d 171, 641 N.W.2d 
158 (both citing Colla v. Mandella, 1 Wis. 2d 594, 598-99, 85 
N.W.2d 345 (1957)). 
57 Johnson v. Am. Family Mut. Ins. Co., 93 Wis. 2d 633, 646, 
287 N.W.2d 729 (1980). 
No. 
2008AP1303   
 
57 
 
might ever be applied to preclude recovery in a bad faith 
action.  Even if we were to apply judicial public policy 
considerations to a bad faith claim, the facts in the present 
case would not preclude recovery on that basis.   
¶153 Furthermore, the instant case is distinguishable from 
Schlomer 
on 
its 
facts. 
 
The 
Wisconsin 
Supreme 
Court's 
determination in Schlomer rested on a fact-specific evaluation 
that there had been "no proof" demonstrating the claim would 
have settled earlier.58  The court noted that the first attorney 
had been seriously ill and hospitalized for extended periods 
during his representation and that he had kept abreast of legal 
developments, which meant the child's claim was not barred by 
the passage of time.  The child was also free to retain another 
lawyer to pursue his claim and eventually did so.   
¶154 In contrast, Liberty Mutual retained control over 
handling the Groth claim and was in the best position to 
evaluate the risks.  Roehl Transport presented ample evidence 
from which the jury could conclude that the claim would have 
settled earlier for a lesser amount.  Roehl Transport's 
witnesses testified that the case should have been settled in 
the range of $100,000 if not for Liberty Mutual's bad faith 
conduct.  The jury had credible evidence to conclude that 
Liberty 
Mutual's 
bad 
faith 
increased 
Roehl 
Transport's 
liability.  Thus, there is no basis for the court to conclude in 
the instant case as a matter of law that the damages were "too 
                                                 
58 Schlomer, 169 Wis. 2d at 253. 
No. 
2008AP1303   
 
58 
 
remote" from the bad faith and "too out of proportion to the 
culpability," as the court determined in Schlomer.  The 
consequences suffered——greater liability to a tort victim——were 
exactly what would be expected from an insurance company's bad 
faith handling of a liability claim.  
¶155 To the extent that Liberty Mutual argues that the 
hypothetical value for which a claim "could have settled" should 
never be a permitted basis for recovery, this court's decision 
in Schlomer undermines their argument.  There, the supreme court 
held that delay by an attorney standing alone could not justify 
recovering damages but allowed that "loss of a witness . . . or 
similar 
results" 
might 
warrant 
recovery. 
 
Schlomer, 
169 
Wis. 2d at 253.   
¶156 In the instant case, Roehl Transport adduced evidence 
from which the jury could conclude that Liberty Mutual acted in 
bad faith by failing to retain an accident reconstructionist and 
failing 
to 
secure 
evidence 
to 
reduce 
Roehl 
Transport's 
liability.  The consequences of these actions are "similar to" 
the loss of a witness, which Schlomer suggests can permit 
recovery of damages.59 
                                                 
59 In Schlomer, the court of appeals relied on a broad 
policy rationale, namely that allowing recovery would "open[] 
the door to malpractice claims . . . resting largely on evidence 
of an abstract and hypothetical nature," and permit recovery in 
an area with no "sensible or just stopping point."  See 
Schlomer, 169 Wis. 2d at 251-52.  The supreme court explicitly 
rejected this broader reasoning, resting the high court's 
decision to deny recovery on a narrower and more fact-specific 
evaluation.  Id. at 254. 
No. 
2008AP1303   
 
59 
 
¶157 Liberty Mutual's argument to preclude liability does 
not ultimately rest on judicial public policy considerations.  
In arguing this issues, Liberty Mutual is in essence restating 
their protest that only speculative or opinion evidence of the 
possible settlement value of Groth's claim was presented.  
Liberty Mutual's judicial public policy argument amounts to 
reiterating the company's attack on the sufficiency of the 
evidence supporting the jury's verdict and award of damages.  We 
have already reviewed the evidence and have rejected Liberty 
Mutual's attack on its sufficiency.    
¶158 The award of damages in the present case is not barred 
by judicial public policy considerations. 
V 
¶159 Next we consider the issue of attorney fees.  In its 
complaint, Roehl Transport sought recovery of its attorney fees 
and costs in bringing this bad faith action.  Both parties 
agree, as do we, that attorney fees are recoverable as 
compensatory damage in a bad faith action.60  Liberty Mutual 
argues, however, that it has a constitutional right to a jury to 
determine attorney fees and that Roehl Transport was required to 
submit proof of the amount of its attorney fees to the jury.  
Whether attorney fees may be awarded as damages in a bad faith 
claim 
is 
a question of law that this court determines 
                                                 
60 "[A]s damages resulting from the tort of bad faith, 
attorney fees do not remain attorney fees, but instead are 
transformed into damages."  Stewart v. Farmers Ins. Group, 2009 
WI App 130, ¶14, 321 Wis. 2d 391, 773 N.W.2d 513.  
No. 
2008AP1303   
 
60 
 
independently, benefiting from the analysis of the circuit 
court.61 
¶160 The jury was not asked in the present case to decide 
whether Roehl Transport should be awarded attorney fees or in 
what amount.  Rather, Roehl Transport filed a post-trial motion 
with the circuit court seeking an award of its attorney fees.  
The circuit court denied Roehl Transport's motion because "Roehl 
Transport decided not to bring evidence of attorney's fees at 
trial" and "compensatory damages must be awarded by the trier of 
fact based on the evidence brought at trial . . . ."   
¶161 We conclude that Roehl Transport was entitled to 
attorney fees as a matter of law as a result of the jury's 
finding of bad faith and that the determination of the amount of 
attorney fees as compensatory damages is a matter of law for the 
circuit court to determine.  Accordingly, the circuit court 
erred in denying Roehl Transport's request for attorney fees and 
in failing to determine the amount of fees to be awarded to 
Roehl Transport.  We therefore reverse the circuit court's 
denial of Roehl Transport's motion requesting attorney fees and 
remand the matter to the circuit court to determine the attorney 
fees to be awarded to Roehl Transport as compensatory damages.  
¶162 The critical case on which both parties rely in 
discussing attorney fees is DeChant v. Monarch Life Ins. Co., 
200 Wis. 2d 559, 547 N.W.2d 592 (1996).  In DeChant, a first-
                                                 
61 DeChant, 200 Wis. 2d at 568 (citing Newhouse by Skow v. 
Citizens Sec. Mut. Ins., 176 Wis. 2d 824, 837, 501 N.W.2d 1 
(1933)). 
No. 
2008AP1303   
 
61 
 
party bad faith case, the insured sued his insurance company for 
breach of contract and for bad faith for the insurance company's 
discontinuation of his disability benefits.62  In special 
interrogatories, the jury found, inter alia, that the insurance 
company had breached the policy and that it had acted in bad 
faith.  It awarded "100 percent" of the insured's attorney fees 
incurred in prosecuting the lawsuit, in addition to other 
damages.63  The jury did not, however, enter findings about 
attorney fees or award the dollar amount of the fees.  The 
circuit court then inserted a dollar amount into the verdict 
form for attorney fees.64   
¶163 The Wisconsin Supreme Court granted review to decide 
whether attorney fees incurred by an insured in prosecuting an 
insurance bad faith action constitute compensable damages for 
bad faith.  The court determined that the insured's attorney 
fees were to be awarded as damages, reasoning that "when an 
insurer acts in bad faith by denying benefits, it is liable to 
the insured in tort for any damages which are the proximate 
result of that conduct" and that attorney fees should be 
included in compensatory damages when "bad faith caused [the 
insured] to incur legal expenses" because he "was forced to 
                                                 
62 DeChant, 200 Wis. 2d at 565.   
63 Id. at 566.   
64 Id. at 566-67.   
No. 
2008AP1303   
 
62 
 
retain an attorney to obtain the benefits" of his insurance 
policy.  DeChant, 200 Wis. 2d at 571.65   
¶164 DeChant was extended to third party bad faith claims 
in Majorowicz v. Allied Mutual Insurance Co., 212 Wis. 2d 513, 
569 N.W.2d 472 (Ct. App. 1997).  In Majorowicz, as in the 
present case, an insured sued the insurance company for bad 
faith 
in 
handling 
a 
third-party 
personal 
injury 
claim.  
Majorowicz, 212 Wis. 2d at 521.   
¶165 On a motion for relief from judgment pursuant to Wis. 
Stat. § 806.07, Majorowicz moved for an award of attorney fees, 
urging the circuit court to award attorney fees as allowed in 
the DeChant case, which had just been decided.  The circuit 
court granted the motion and awarded actual attorney fees.  The 
circuit court did not require a jury determination of attorney 
fees.   
¶166 In Majorowicz, the court of appeals concluded that 
DeChant required "recovery of attorney fees as actual damages" 
in a third-party bad faith claim.  In order to avoid 
"uncompensable harms," the court of appeals held that legal 
expenses resulting from the insurance company's bad faith should 
be affirmed as a proper award of damages.  The court of appeals 
reasoned that: 
                                                 
65 The DeChant court "recognized the subtle but significant 
difference between attorney's fees attributable to bringing a 
lawsuit and those recoverable as damages resulting from a tort.  
The former is intended to compensate the attorneys, whereas the 
latter is intended to compensate the victims."  Reusch v. Roob, 
2000 WI App 76, ¶35, 234 Wis. 2d 270, 610 N.W.2d 168.   
No. 
2008AP1303   
 
63 
 
Allied's bad faith conduct exposed Majorowicz to an 
additional set of harms not covered by her policy.  
Unless Majorowicz is able to obtain relief in the form 
of attorney fees and other damages, the bad faith 
denial in not properly investigating, evaluating and 
properly 
communicating 
with 
her 
exposes 
her 
to 
numerous uncompensable harms.  Allied's bad faith 
caused Majorowicz to incur legal expenses.  If Allied 
had properly investigated, evaluated, and settled the 
claims, Majorowicz would not have had to seek the 
assistance of an attorney to represent her in the bad 
faith claim. 
Majorowicz, 212 Wis. 2d at 536.   
¶167 The instant case is analogous to Majorowicz. Had 
Liberty Mutual 
properly fulfilled its responsibilities in 
handling the Groth claim, Roehl Transport would not have had to 
hire an attorney to recover its losses in this bad faith claim.  
Majorowicz teaches that when a jury finds bad faith in a third-
party bad faith claim, the insured is entitled to recovery of 
attorney fees as a matter of law, a jury determination of the 
amount of the attorney fees is not required, and the circuit 
court may determine the amount of attorney fees.  
¶168 Subsequent bad faith cases have recognized that the 
circuit court can determine the attorney fees to be awarded as 
damages in bad faith tort cases.  For example, in Allied 
Processors, Inc. v. Western National Mutual Insurance Co., 2001 
WI App 129, ¶39, 246 Wis. 2d 579, 629 N.W.2d 329, in a post-
verdict motion, the insured in a third-party bad faith claim 
sought an award of attorney fees as compensatory damages based 
on the jury's finding of bad faith.  The circuit court then 
entered judgment for the amount of attorney fees sought, namely 
No. 
2008AP1303   
 
64 
 
one-third of the amount of the jury's compensatory damages award 
under a contingency fee arrangement.   
¶169 The court of appeals affirmed both the insured's right 
to recover attorney fees and the circuit court's determination 
of the amount.66  Assuming without deciding that the insured must 
establish that the fees actually incurred were reasonable,67 the 
court of appeals affirmed the amount of fees entered as a proper 
exercise of the circuit court's discretion. 
¶170 These cases thus teach that the successful complainant 
in a bad faith action is entitled to an award of attorney fees 
as compensatory damages, and that the circuit court is in a 
position to determine the amount of the award.   
¶171 DeChant also teaches, however, that there may be cases 
in which a question about the award of jury fees as compensatory 
damages for bad faith is best submitted to the jury.  In 
DeChant, the plaintiff was seeking damages for both breach of 
contract and bad faith.  The two actions were tried together.  
The jury was asked, "[W]hat amount of money would fairly 
                                                 
66 Allied Processors, Inc. v. W. Nat'l Mut. Ins. Co., 2001 
WI App 129, ¶¶45, 47, 246 Wis. 2d 579, 629 N.W.2d 329. 
67 The parties disputed who had the burden of proof.  The 
insured argued that when attorney fees are a component of 
compensatory damages, the rule should be that the insured may 
recover the actual fees unless the insurance company shows that 
the fees are unreasonable.  The insurance company apparently 
argued that the insured must establish that the actual fees were 
reasonable attorney fees.  Allied Processors, 246 Wis. 2d 579, 
¶45. 
No. 
2008AP1303   
 
65 
 
compensate Plaintiff for damages caused by Defendant's bad faith 
conduct?"  The jury answered as follows: 
a) for attorney's fees:  100% 
b) for bond premiums:    100% 
c) for all other:        $300,000 
¶172 The apportionment of attorney fees between the two 
different causes of action may have made a jury determination 
necessary in DeChant.  In the instant case, only the bad faith 
claim was submitted to the jury.  Roehl Transport was entitled 
to an award of attorney fees as a matter of law and no 
apportionment of attorney fees was required.  The circuit court 
therefore erred in the present case in denying an award for 
attorney fees that Roehl Transport claimed in its complaint and 
thereafter. 
¶173 Liberty Mutual's arguments that a jury determination 
of attorney fees is required in the instant case are not 
persuasive.  Attorney fees are awarded as a matter of law to a 
successful claimant in a bad faith action.  Practical trial 
court processes and the unique nature of a circuit court's 
expertise in determining attorney fees make the award of 
attorney fees different from other compensatory damages to be 
determined by the jury. 
¶174 Liberty Mutual argues that Brandt v. Superior Court of 
San Diego County, 693 P.2d 796 (Cal. 1985), a case explained and 
followed in DeChant, teaches that the award of attorney fees 
must be made by the jury.  Brandt was a first-party bad faith 
No. 
2008AP1303   
 
66 
 
case in which the insured brought a bad faith claim together 
with a breach of contract claim.  Brandt stated that since the 
attorney fees were recoverable as damages in a bad faith claim, 
the determination of the recoverable fees must be made by the 
trier of fact unless the parties stipulate otherwise.68  Liberty 
Mutual argues that adhering to Brandt, it was entitled to have 
the jury decide the issue of attorney fees.  
¶175 We are not persuaded that DeChant's reliance on Brandt 
requires that the award of attorneys fees be made by the jury.  
¶176 DeChant adopted the substantive law stated in Brandt 
that attorney fees were recoverable as damages in a bad faith 
claim, but DeChant did not adopt Brandt's discussion of a jury 
trial.   
¶177 Furthermore, the Brandt court itself recognized that 
an award of attorney fees made by the trial court after trial 
"would normally be preferable since the determination then would 
be made after completion of legal services, and proof that 
otherwise would have been presented to the jury could be 
simplified because of the court's expertise in evaluating legal 
services."69  Brandt thus recognized that the position Liberty 
Mutual argues would make it impossible for the jury to address 
the full value of damages.  Attorney fees continue to be 
incurred in the final stages of trial, in closing arguments, and 
                                                 
68 Brandt v. Sup. Ct. of San Diego County, 693 P.2d 796, 819 
(Cal. 1985).  
69 Brandt, 693 P.2d at 800. 
No. 
2008AP1303   
 
67 
 
in post-trial proceedings, all of which cannot be determined by 
the jury.70  
¶178 Furthermore, if we accepted Liberty Mutual's position, 
documentation of the attorneys' actions and testimony by the 
attorneys would need to be presented to the jury, shifting the 
focus of the trial away from the central issues and creating the 
unavoidable risk of prejudice.  Inadmissible evidence produced 
in discovery for which attorney fees were incurred might have to 
be produced, and issues that were dismissed before trial but for 
which the claimant nevertheless incurred attorney fees would 
have to be raised at trial.  The same attorneys litigating the 
case would be called upon to testify about the nature of their 
trial preparations and the value of their services.  Trying the 
amount of attorney fees to a jury in the same trial in which the 
bad faith claim is being decided presents unworkable challenges 
to the orderly conduct of the trial process. 
¶179 A trial court's expertise and preferential position in 
evaluating legal services, as recognized in Brandt, is also a 
well-accepted concept in Wisconsin law:  The circuit court "is 
in an advantageous position to observe the amount and quality of 
                                                 
70 Even the Brandt case, which explicitly recognized the 
right to a determination by the trier of fact on proper 
allocation of attorneys' fees, noted that "[a] stipulation for a 
postjudgment allocation and award by the trial court would 
normally be preferable since the determination then would be 
made after completion of the legal services."  Brandt, 693 P.2d 
at 819. 
No. 
2008AP1303   
 
68 
 
work 
performed 
and 
has 
the 
expertise 
to 
evaluate 
the 
reasonableness of the fees."71  
¶180 Only a separate trial on the issue of attorney fees 
after all other proceedings on the bad faith claim have 
concluded would allow all attorney fees to be presented and 
proved to a jury.  The law does not require such an 
extraordinary procedure, and Liberty Mutual cites no case in 
which such a procedure has been followed.  
¶181 For these reasons, Brandt does not persuade us to 
adopt Liberty Mutual's position. 
¶182 Liberty Mutual also cites a recent decision by the 
court of appeals, Stewart v. Farmers Ins. Group, 2009 WI App 
130, 321 Wis. 2d 391, 773 N.W.2d 513, as support for its 
position.  Liberty Mutual argues that just as the award of 
attorney fees was subsumed in the offer of judgment in Stewart, 
here attorney fees should be considered as included in the 
jury's award of compensatory damages.  
¶183 Stewart does not support Liberty Mutual.  Stewart 
recognizes that attorney fees become recoverable as damages upon 
a finding of bad faith and that an offer of judgment includes 
all damages.  A litigant cannot accept an offer of judgment as a 
complete settlement and then seek a further award of attorney 
fees as damages.  In the instant case, no evidence of attorney 
                                                 
71 Allied Processors, 246 Wis. 2d 579, ¶46.  In Tesch v. 
Tesch, 63 Wis. 2d 320, 334-35, 217 N.W.2d 647 (1974), the court 
observed that familiarity with the case made the trial court 
better suited than the jury to evaluate and award a claim for 
attorney fees. 
No. 
2008AP1303   
 
69 
 
fees was presented to the jury.  Roehl Transport did not ask the 
jury for an award of attorney fees.  Under these circumstances, 
the jury's damage award cannot be considered to have included 
the attorney fees to which Roehl Transport is legally entitled.   
¶184 In 
sum, 
the 
cases 
teach 
that 
a 
postverdict 
determination of attorney fees by the circuit court has been an 
acceptable procedure for the award of attorney fees as part of 
compensatory damages recoverable in a bad faith claim.  Here, 
the jury found that Liberty Mutual acted in bad faith.  Roehl 
Transport 
is 
entitled to an award of attorney fees as 
compensatory damages.  The amount of the attorney fees may be 
determined by the circuit court on a postverdict motion.  We 
therefore 
reverse 
the 
circuit 
court's 
denial 
of 
Roehl 
Transport's motion seeking attorney fees and remand the matter 
to the circuit court to determine the amount of attorney fees 
Roehl Transport may recover as compensatory damages.72 
                                                 
72 Roehl Transport asks this court to enter an order 
awarding $738,191 in attorney fees and costs.  It argues that 
because Liberty Mutual had no specific objection to any item of 
Roehl Transport's claimed fees, this court should award the full 
amount claimed.   
We disagree with Roehl Transport. The circuit court's 
determination of the value of attorney fees will ordinarily be 
affirmed except for an erroneous exercise of discretion.  In the 
present case, the circuit court has made no determination for us 
to review.  We therefore should remand to allow the circuit 
court to act. 
No. 
2008AP1303   
 
70 
 
VI 
¶185 At last, we turn to the final issue presented:  
whether the circuit court erred in dismissing Roehl Transport's 
claim for punitive damages. 
¶186 In its complaint, Roehl Transport sought punitive 
damages "in an amount to be determined by the trier of fact."  
The circuit court ruled that Roehl Transport could not pursue 
punitive damages, and the issue was not put to the jury.  After 
the verdict was entered, Roehl Transport moved for a second 
trial only on the issue of punitive damages.  The circuit court 
denied this motion.  Roehl Transport raised this issue in this 
court. 
¶187 "A circuit court submits a question of punitive 
damages to the jury only after determining, as a matter of law, 
that there is evidence to support an award of punitive 
damages."73  Whether sufficient evidence is presented to submit 
the question of punitive damages to a jury is a question of law 
                                                                                                                                                             
Another reason for remand is that it is not apparent  
whether Roehl Transport's submitted claim for attorney fees 
improperly includes a share of fees attributable to its pursuit 
of punitive damages in the present case.  See DeChant, 200 
Wis. 2d at 581 (Abrahamson, J., concurring) ("[A]ttorney fees 
incurred in proving punitive damages cannot be construed as 
damages resulting from tortious bad faith conduct.  Instead, 
they begin as attorney fees and remain attorney fees, never 
undergoing a transvaluation into damages."); Majorowicz, 212 
Wis. 2d at 536-37 (declaring that attorney fees incurred in 
pursuing punitive damages are not available as a component of 
compensatory damages for a bad faith claim); Allied Processors, 
246 Wis. 2d 579, ¶42 n.11 (same). 
73 Miller v. Wal-Mart Stores, Inc., 219 Wis. 2d 250, 268, 
580 N.W.2d 233 (1998). 
No. 
2008AP1303   
 
71 
 
for this court's independent determination, benefiting from the 
analysis of the circuit court.74  
¶188 The availability of punitive damages is governed by 
Wis. Stat. § 895.043.75  A plaintiff "may receive punitive 
damages if evidence is submitted showing that the defendant 
acted maliciously toward the plaintiff or in an intentional 
disregard of the rights of the plaintiff."  Wis. Stat. 
§ 895.043(3).   
¶189 Circuit courts are to "serve as gatekeepers before 
sending a question on punitive damages to the jury" and "should 
not submit the issue of punitive damages to the jury in the 
absence of evidence warranting a conclusion to a reasonable 
certainty that the party against whom punitive damages may be 
awarded acted with the requisite . . . conduct."76 
¶190 We have interpreted the statutory standard of an 
"intentional disregard of the rights of the plaintiff" to 
require "a purpose to disregard the plaintiff's rights" or an 
awareness that one's actions "are substantially certain to 
result in the plaintiff's rights being disregarded.77  In Strenke 
                                                 
74 Wischer v. Mitsubishi Heavy Indus. Am., Inc., 2005 WI 26, 
¶4, 279 Wis. 2d 4, 694 N.W.2d 320; Strenke v. Hogner, 2005 WI 
25, ¶13, 279 Wis. 2d 52, 694 N.W.2d 296. 
75 Wisconsin Stat. § 895.043 was previously codified as Wis. 
Stat. § 895.85.  The section was renumbered without substantive 
change by 2005 Wis. Act 155 § 71. 
76 Strenke, 279 Wis. 2d 52, ¶40 (citing Bank of Sun Prairie 
v. Esser, 155 Wis. 2d 724, 735, 456 N.W.2d 585 (1990)).  See 
also Wischer, 279 Wis. 2d at 21.  
77 Strenke, 279 Wis. 2d 52, ¶38.   
No. 
2008AP1303   
 
72 
 
v. Hogner, 2005 WI 25, 279 Wis. 2d 52, 694 N.W.2d 296, we 
described this "heightened" standard of "purposeful disregard" 
imposed by Wis. Stat. § 895.043 as follows: 
[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 substantially certain 
to result in the plaintiff's rights being disregarded. 
This will require that an act or course of conduct be 
deliberate.  Additionally, the act or conduct must 
actually 
disregard the rights of the plaintiff, 
whether it be a right to safety, health or life, a 
property right, or some other right.  Finally, the act 
or conduct must be sufficiently aggravated to warrant 
punishment by punitive damages. 
Strenke, 279 Wis. 2d 52, ¶38. 
¶191 In the instant case, the circuit court determined not 
to submit Roehl Transport's claim for punitive damages to the 
jury and dismissed the claim, observing that "nothing that I 
heard 
even 
came 
close" 
to 
justifying 
punitive 
damages.78  
                                                 
78 At the close of plaintiff's evidence, Judge Lundell ruled 
from the bench on punitive damages as follows: 
I listened to the testimony and the depositions and 
whatever 
with 
an 
ear 
toward . . . the 
operative 
language for punitive damages.  I, honestly, regarding 
punitive damages, did not hear anything that was so 
outrageous 
that 
that 
particular 
aspect 
of 
the 
complaint ought to go on.  To me, this is a case where 
there was an opportunity to settle early on . . . for 
lots of reasons, none of which rise to the level of 
punitive 
conduct, 
for 
lots 
of 
reasons 
didn't 
happen. . . . I'm not sure you need an expert to give 
an opinion about punitive damages, but there just 
simply is nothing there.  And I listened carefully.  I 
was waiting for it, because I thought that was sort of 
something the plaintiff was going to be bringing in 
somewhere along the way, but I didn't hear it.  
No. 
2008AP1303   
 
73 
 
Postverdict, Roehl Transport moved for a new trial on the issue 
of punitive damages, and the circuit court denied this motion.   
¶192 Independently reviewing the evidence, we affirm the 
circuit court's rulings on punitive damages.  The evidence does 
not show that Liberty Mutual had a "purpose" to disregard Roehl 
Transport's 
rights 
or 
was 
aware 
that 
their 
acts 
were 
"substantially certain" to result in such disregard.  Moreover, 
the conduct was not of a type "sufficiently aggravated" to 
warrant punitive damages.  The circuit court properly withheld 
the issue of punitive damages from the jury. 
¶193 Roehl Transport argues that the award of punitive 
damages upheld in the bad faith case of Majorowicz v. Allied 
Mutual Ins. Co., 212 Wis. 2d 513, 569 N.W.2d 472 (Ct. App. 
1997), is applicable here.  We disagree with Roehl Transport.  
Majorowicz is readily distinguished.   
¶194 Majorowicz was analyzed under the common-law standard 
for punitive damages that preceded the enactment of Wis. Stat. 
§ 895.043.  See Majorowicz, 212 Wis. 2d at 532-33.  In enacting 
Wis. Stat. § 895.043, the legislature intended to make punitive 
damages less readily available.79   
¶195 Moreover, the facts of Majorowicz demonstrate that 
punitive damages are not warranted in the instant case.  There, 
                                                                                                                                                             
So . . . punitive damages are not going to go forward.  
That's it.  
79 See Strenke, 279 Wis. 2d 52, ¶34 ("the legislature 
intended to require an increased level of consciousness and 
deliberateness at which the defendant must disregard the 
plaintiff's rights in order to be subject to punitive damages"). 
No. 
2008AP1303   
 
74 
 
the insured carried $100,000 in auto liability coverage.  After 
the insurance company refused a settlement offer for the policy 
limits, total judgment was entered against the insured for 
$221,213.10.  Although the facts presented "a clear liability 
case," the insurance company, in possession of negative medical 
reports, had advised the insured that there was little chance of 
an excess verdict, advised the insured against hiring her own 
lawyer, and did not inform the insured of a settlement offer.  
The 
jury 
could 
reasonably 
conclude 
that 
under 
these 
circumstances 
the 
insurance 
company's 
actions 
demonstrated 
"intentional disregard" of rights.  Majorowicz, 212 Wis. 2d at 
532-33; see also Strenke, 279 Wis. 2d at 65-66. 
¶196 By contrast, the evidence in the present case does not 
justify punitive damages. Although ample evidence exists to 
support the jury's finding of bad faith, the record does not 
show that Liberty Mutual's actions demonstrated "intentional 
disregard" of Roehl Transport's rights as we have interpreted 
that standard.  The evidence does not demonstrate that Liberty 
Mutual had "a purpose to disregard the plaintiff's rights" or an 
awareness that its actions "are substantially certain to result 
in the plaintiff's rights being disregarded."   
¶197 The circuit court heard the evidence and concluded 
that the issue of punitive damages should not be submitted to 
the jury.  We agree with the circuit court.  We affirm the 
circuit court's dismissal of the punitive damages claim and 
denial of Roehl Transport's motion for a new trial on punitive 
damages. 
No. 
2008AP1303   
 
75 
 
* * * * 
¶198 In conclusion, we hold as follows:  
(1) Roehl Transport, an insured with a deductible for 
its liability coverage, has a cognizable bad faith claim 
against its insurance company when the company has control 
over settlement of a third-party claim and engaged in bad 
faith conduct toward the insured, even though the judgment 
does not exceed the policy limits.   
(2) Sufficient credible evidence supports the jury's 
finding of bad faith and the jury's determination of 
damages in this case. 
(3) Judicial public policy does not preclude Roehl 
Transport's bad faith claim. 
(4) Roehl Transport is entitled to attorney fees as a 
matter of law upon the jury's finding of bad faith.  The 
amount of attorney fees to be awarded is for the circuit 
court to determine on remand. 
(5) The circuit court did not err in denying Roehl 
Transport's claim for punitive damages. 
¶199 Accordingly, we affirm the judgment and order of the 
circuit court awarding Roehl Transport damages on its bad faith 
claim and denying Roehl Transport's claim for punitive damages.  
We reverse the circuit court's denial of attorney fees to Roehl 
Transport and remand to the circuit court the determination of 
the amount of attorney fees Roehl Transport may recover. 
No. 
2008AP1303   
 
76 
 
By the Court.—The judgment and order of the circuit court 
are affirmed in part and reversed in part, and the cause is 
remanded.   
No. 
2008AP1303   
 
 
 
1