Title: Christopher Aslakson v. Gallagher Bassett Services, Inc.

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2007 WI 39 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2004AP2588 
 
 
COMPLETE TITLE: 
 
 
Christopher Aslakson, 
          Plaintiff-Respondent-Petitioner, 
     v. 
Gallagher Bassett Services, Inc., 
          Defendant-Appellant, 
 
Wisconsin Worker's Compensation Uninsured 
Employer's Fund, 
          Defendant. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2006 WI App 35 
Reported at: 289 Wis. 2d 664, 711 N.W.2d 667 
(Ct. App. 2006—Published) 
 
 
OPINION FILED: 
March 29, 2007   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
November 1, 2006   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Dane   
 
JUDGE: 
Moria Krueger 
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
WILCOX, J., dissents (opinion filed).   
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the plaintiff-respondent-petitioner there were briefs 
by Daniel C. Arndt and Arndt, Buswell & Thorn, S.C., Sparta, and 
oral argument by Daniel C. Arndt. 
 
For the defendant-appellant there was a brief by David A. 
Piehler, Eric C. Pease, and Piehler & Strande, S.C., Wausau, and 
oral argument by David A. Piehler. 
 
An amicus curiae brief was filed by Jennifer Sloan Lattis, 
assistant attorney general, with whom on the brief was Peggy A. 
Lautenschlater, attorney general, on behalf of the Department of 
Workforce Development. 
 
 
 
2 
An amicus curiae brief was filed by John B. Edmondson, 
Jennifer Lee Edmondson, and Edmonson Law Office, Appleton; 
Michael 
H. 
Gillick 
and 
Gillick, 
Wicht, 
Gillick 
& 
Graf, 
Milwaukee, on behalf of the Wisconsin Academy of Trial Lawyers. 
 
 
 
2007 WI 39
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2004AP2588  
(L.C. No. 
2003CV3210) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Christopher Aslakson, 
 
          Plaintiff-Respondent-Petitioner, 
 
     v. 
 
Gallagher Bassett Services, Inc., 
 
          Defendant-Appellant, 
 
Wisconsin Worker's Compensation Uninsured 
Employers Fund, 
 
          Defendant. 
 
 
 
FILED 
 
MAR 29, 2007 
 
A. John Voelker 
Acting Clerk of Supreme 
Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Reversed and 
remanded.   
 
¶1 
SHIRLEY S. ABRAHAMSON, C.J.   This is a review of a 
published decision of the court of appeals on interlocutory 
appeal, reversing an order of the circuit court for Dane County, 
Moria Krueger, Judge.1  The circuit court's order denied 
                                                 
1 Aslakson v. Gallagher Bassett Servs., Inc., 2006 WI App 
35, 289 Wis. 2d 664, 711 N.W.2d 667. 
No. 
2004AP2588   
 
2 
 
Gallagher Bassett Services, Inc.'s motion to dismiss the 
complaint, holding that Christopher Aslakson's tort claim of bad 
faith against Gallagher Bassett Services, Inc. was not barred by 
the Worker's Compensation Act.  The circuit court dismissed the 
complaint against the Wisconsin Worker's Compensation Uninsured 
Employers Fund on the ground of sovereign immunity.        
¶2 
The court of appeals reversed the order of the circuit 
court, holding that Wis. Stat. §§ 102.81(1)(a) and 102.18(1)(bp) 
(2003-04)2 and Wis. Admin. Code § DWD 80.62(7)(b) (Sept. 2005) 
establish Christopher Aslakson's exclusive remedy for bad faith 
claims against Gallagher Services and that these provisions also 
disallow any recovery of tort damages for bad faith from 
Gallagher Services.  
¶3 
The liability of the Uninsured Employers Fund is not 
at issue here.  The Uninsured Employers Fund is a "nonlapsible 
trust" fund created by the legislature as part of the Worker's 
Compensation Act.3  The Uninsured Employers Fund provides 
compensation to employees who suffer injuries for which their 
uninsured employer is liable.4 
                                                 
2 All references to the Wisconsin Statutes are to the 2003-
2004 version unless otherwise noted. 
3 Wis. Stat. § 102.80(1).  The Uninsured Employers Fund was 
created in 1989 by the legislature to pay benefits on valid 
worker's 
compensation 
claims 
of 
employees 
of 
uninsured 
employers.  
4 See Wis. Stat. § 102.81(1)(a).   
No. 
2004AP2588   
 
3 
 
¶4 
The 
Department 
of 
Workforce 
Development 
is 
the 
administrator of the Wisconsin worker's compensation system.5  
The Department retained Gallagher Services under Wis. Stat. 
§ 102.81(2) "to process, investigate and pay claims" under the 
Uninsured Employers Fund.6  Thus, Gallagher Services is the 
third-party administrator of the Uninsured Employers Fund; we 
shall often refer to Gallagher Services as the administrator of 
the Uninsured Employers Fund.  The regulations of the Department 
of Workforce Development refer to the administrator of the 
Uninsured Employers Fund as an agent of the Department.7   
¶5 
Christopher Aslakson, the plaintiff, received (after 
significant delay) substantial worker's compensation payments 
from the Uninsured Employers Fund for his job-related injuries 
and does not seek additional worker's compensation benefits in 
                                                 
5 Wis. Stat. § 102.14(1). 
6 Wisconsin Stat. § 102.81(2) provides in relevant part: 
The department may retain an insurance carrier or 
insurance service organization to process, investigate 
and pay claims under this section and may obtain 
excess or stop-loss reinsurance with an insurance 
carrier authorized to do business in this state in an 
amount that the secretary determines is necessary for 
the sound operation of the uninsured employers fund.    
Gallagher 
Services maintains a separate and distinct 
business from the Department and the Uninsured Employers Fund as 
an insurance service organization.   
7 "'Agent' means a third-party administrator or other person 
selected by the department to assist in the administration of 
the uninsured employers fund program."  Wis. Admin. Code § DWD 
80.62(2)(a). 
No. 
2004AP2588   
 
4 
 
this proceeding.  Gallagher Services handled the plaintiff's 
claim for worker's compensation.  In the present case, the 
plaintiff brings a bad faith tort action against Gallagher 
Services for an injury allegedly arising out of the bad faith 
conduct of Gallagher Services in its capacity as administrator 
of the Uninsured Employers Fund and thus as an agent of the 
Department.  
¶6 
The 
question 
presented 
is 
whether 
Wis. 
Stat. 
§ 102.81(1)(a), read in conjunction with § 102.18(1)(bp) of the 
Worker's Compensation Act and Wis. Admin Code § DWD 80.62(7)(b), 
precludes an employee's bad faith tort claim against the 
administrator of the Uninsured Employers Fund (an agent of the 
Department) for its misconduct while processing the worker's 
compensation claim.  Our answer, like that of the circuit court, 
is No.   
¶7 
For the reasons set forth, we conclude that the text 
of Wis. Stat. § 102.81(1)(a) and § 102.18(1)(bp) and Wis. Admin. 
Code § DWD 80.62(7)(b) do not bar the plaintiff's bad faith tort 
claim 
against 
Gallagher 
Services. 
 
Properly 
read, 
these 
provisions apply as follows in the present case:   
¶8 
The Department or its agent must pay an amount equal 
to the worker's compensation owed to an injured employee for an 
injury for which the uninsured employer is liable.  The 
Department and its agent are not, however, liable to pay an 
injured employee of an uninsured employer for the penalty 
statutorily imposed on the employer for bad faith conduct.   
No. 
2004AP2588   
 
5 
 
¶9 
The provisions at issue do not in any way govern the 
plaintiff's bad faith tort action against Gallagher Services.  
The Worker's Compensation Act does not provide any remedy to the 
plaintiff for his bad faith claim against Gallagher Services for 
its 
alleged 
bad 
faith 
conduct 
in 
processing 
a 
worker's 
compensation claim, let alone an exclusive remedy.   
¶10 The injury for which the plaintiff seeks relief in 
this tort action is the injury caused by Gallagher Services' 
alleged 
bad 
faith 
handling 
of 
the 
plaintiff's 
worker's 
compensation claim against an uninsured employer.  This injury 
is separate and distinct from the original injury for which the 
uninsured employer and the Department are liable under the 
Worker's Compensation Act.   
¶11 Our case law recognizes a bad faith tort claim against 
a worker's compensation insurer for an injury separate and 
distinct from the initial injury for which an employer is liable 
under the Act, even though the bad faith occurred during the 
processing of a worker's compensation claim.  The same reasoning 
applies to allow the plaintiff to pursue a bad faith tort action 
against Gallagher Services.  
¶12 Accordingly, we reverse the decision of the court of 
appeals and affirm the order of the circuit court.  We remand 
the cause to the circuit court to reinstate the complaint 
against Gallagher Services. 
I 
No. 
2004AP2588   
 
6 
 
¶13 The facts relevant to our review are not in dispute.  
On a motion to dismiss, we take the plaintiff's allegations in 
the complaint as true. 
¶14 In 1998, the plaintiff was working as a carpenter for 
Ken Donais Construction, which, in turn, was doing subcontractor 
work for the Cleary Building Corporation.  On July 9, 1998, 
while 
the 
plaintiff was building a pole barn, he fell 
approximately eighteen feet to the ground and sustained several 
serious injuries for which he received substantial medical 
treatment and which resulted in temporary and permanent physical 
disability.  Because Ken Donais Construction did not have 
worker's compensation insurance, the plaintiff submitted a 
worker's compensation claim to the Uninsured Employers Fund on 
January 7, 2000.    
¶15 After initially denying the plaintiff's claim for 
worker's compensation, Gallagher Services required the plaintiff 
to submit to an independent medical examination.  On March 13, 
2000, 
the 
independent 
medical 
examination 
confirmed 
the 
plaintiff's 
temporary 
and 
permanent 
disability 
but 
found 
disability levels lower than those determined by the plaintiff's 
personal 
physician.8 
 
Nonetheless, 
the 
findings 
of 
the 
independent medical examination clearly entitled the plaintiff 
to worker's compensation benefits.  Despite the plaintiff's 
repeated requests, as of September 2001, Gallagher Services had 
                                                 
8 Gallagher's own vocational expert conceded the plaintiff 
sustained up to a 10% loss of earning capacity due to his 
physical disabilities.   
No. 
2004AP2588   
 
7 
 
not distributed any worker's compensation benefits to the 
plaintiff. 
¶16 The plaintiff sought a hearing before the Worker's 
Compensation Division regarding Gallagher Services' denial of 
worker's compensation benefits.  On November 29, 2001, the 
administrative law judge found in the plaintiff's favor and 
ordered payment of benefits totaling approximately $100,000.  
Gallagher Services, however, authorized the Uninsured Employers 
Fund to pay only $4,000 and refused to pay the remainder of the 
award.   
¶17 Gallagher Services vigorously sought review of the 
award.  On May 31, 2002, the Labor and Industry Review 
Commission (LIRC) adopted the findings and order of the 
administrative law judge as its own.  Gallagher Services then 
sought review in the Dane County Circuit Court, which on 
December 12, 2002 affirmed the LIRC decision.  Gallagher 
Services then appealed to the court of appeals, which on 
September 25, 2003 upheld the LIRC decision.  Only then did 
Gallagher Services finally pay the balance of the plaintiff's 
claim. 
¶18 The plaintiff brought the present action in circuit 
court against the Uninsured Employers Fund and Gallagher 
Services, alleging that both the initial denial of benefits and 
the numerous reviews were pursued in bad faith.  The plaintiff 
asserts that at no time did the Uninsured Employers Fund and 
Gallagher Services have a good faith basis for contesting his 
No. 
2004AP2588   
 
8 
 
worker's compensation claim and that the appeals were taken 
merely to delay payment of rightfully owed benefits.   
¶19 Gallagher Services and the Uninsured Employers Fund 
filed a motion to dismiss the complaint in the circuit court, 
contending that sovereign immunity precluded the claims against 
the Uninsured Employers Fund; that the plaintiff's claims were 
factually 
insufficient; and that the "exclusive remedies" 
provisions in the Worker's Compensation Act precluded the bad 
faith claims against both Gallagher Services and the Uninsured 
Employers Fund.  
¶20 The circuit court granted the Uninsured Employers 
Fund's motion to dismiss the claim against it on sovereign 
immunity grounds.  The plaintiff does not challenge the circuit 
court's dismissal of the claim against the Uninsured Employers 
Fund, and we do not address this issue.   
¶21 The circuit court denied Gallagher Services' motion to 
dismiss the complaint against it, holding that the complaint 
alleged sufficient facts to support a bad faith claim.  The 
circuit court concluded that Wis. Stat. §§ 102.81(1)(a) and 
102.18(1)(bp) did not govern a remedy for the bad faith conduct 
of Gallagher Services, the administrator and agent of the 
Department, and did not bar the plaintiff from pursuing a bad 
faith tort claim against Gallagher Services. 
¶22 The court of appeals granted Gallagher Services' 
motion for leave to file an interlocutory appeal of the circuit 
court's denial of its motion to dismiss the complaint.  The 
court of appeals reversed the order of the circuit court, ruling 
No. 
2004AP2588   
 
9 
 
that Wis. Stat. § 102.18(1)(bp) provided the exclusive remedy 
for bad faith claims under the Worker's Compensation Act and 
that Wis. Stat. § 102.81(1)(a) and Wis. Admin. Code DWD 
§ 80.62(7)(b) exempted Gallagher Services from any liability for 
bad faith claims.     
II 
¶23 In reviewing a circuit court's denial of a motion to 
dismiss a complaint for failure to state a cause of action, the 
court accepts the factual allegations of the complaint as true.  
The parties and the court assume for purposes of this review, as 
the circuit court found, that the complaint is factually 
sufficient to state a claim for the tort of bad faith.  This 
court will affirm the court of appeals' dismissal of the 
plaintiff's complaint for a bad faith tort if, as a matter of 
law, 
the 
plaintiff's 
action 
is 
barred 
by 
the 
Worker's 
Compensation Act.  The effect of the Act on the plaintiff's 
claim 
is 
a question of law that this court determines 
independently of the circuit court and the court of appeals but 
benefiting from their analyses.  
¶24 The court must interpret and apply both the Worker's 
Compensation Act, Wis. Stat. ch. 102, and an administrative 
regulation, 
Wis. 
Admin. 
Code 
§ DWD 
80.62(7)(b). 
 
The 
interpretation 
and 
application 
of 
a 
statute 
and 
an 
administrative regulation to undisputed facts are ordinarily 
No. 
2004AP2588   
 
10 
 
questions of law that we determine independently of the circuit 
court and court of appeals, benefiting from their analyses.9   
¶25 Further, when interpreting administrative regulations, 
we use the same rules of interpretation as we apply to 
statutes.10  Administrative regulations promulgated pursuant to a 
power delegated by the legislature "should be construed together 
with the statute to make, if possible, an effectual piece of 
legislation in harmony with common sense and sound reason."11  
With 
regard 
to 
an 
agency's 
interpretation 
of 
its 
own 
administrative regulations, "an administrative construction of 
the agency's own regulations is controlling in determining their 
meaning unless plainly erroneous or inconsistent with the 
regulations."12 
 
The 
court 
has 
also 
stated 
that 
"an 
administrative 
interpretation 
of 
its 
own 
rules 
by 
an 
administrative agency . . . should be accorded great weight by 
the courts 'unless it is plainly erroneous or inconsistent' with 
the regulations."13    
                                                 
9 Winters v. Winters, 2005 WI App 94, ¶7, 281 Wis. 2d 798, 
699 N.W.2d 229; Garcia v. Mazda Motor of Am., Inc., 2004 WI 93, 
¶7, 273 Wis. 2d 612, 682 N.W.2d 365; Moonlight v. Boyce, 125 
Wis. 2d 298, 303, 372 N.W.2d 479 (Ct. App. 1985).   
10 State v. Busch, 217 Wis. 2d 429, 441, 576 N.W.2d 904 
(1998) (citations omitted).     
11 Id. 
12 Law Enforcement Standards Bd. v. Village of Lyndon 
Station, 101 Wis. 2d 472, 490, 305 N.W.2d 89 (1981).  
13 State ex rel. Durando v. State Athletic Comm'n, 272 Wis. 
191, 195, 75 N.W.2d 451 (1956) (citations omitted). 
No. 
2004AP2588   
 
11 
 
III 
¶26 This case requires the court to determine whether the 
Worker's Compensation Act provides a remedy against Gallagher 
Services, the administrator of the Uninsured Employers Fund and 
agent of the Department, for its alleged bad faith conduct and 
whether the Act bars the plaintiff's tort claim against 
Gallagher Services for bad faith.14 
¶27 To answer these questions, we must examine two 
provisions 
of 
the 
Worker's 
Compensation 
Act, 
Wis. 
Stat. 
§§ 102.81(1)(a) and 102.18(1)(bp), and Wis. Admin. Code § DWD 
80.62(7)(b). 
 
These 
statutes 
and 
the 
regulation 
are 
interrelated.  Wisconsin Stat. § 102.81(1)(a) and the regulation 
incorporate by reference the terms of § 102.18(1)(bp). 
¶28 We begin by summarizing the positions of the parties 
and our interpretation of the statutes and regulation at issue.  
As expected, the parties disagree over the proper interpretation 
                                                 
14 The Worker's Compensation Act represents the legislative 
compromise 
between 
the 
competing 
interests 
of 
employers, 
employees, and the general public, statutorily guaranteeing 
compensation to employees for their work-related injuries in 
exchange for their relinquishment of common-law tort remedies.  
The Worker's Compensation Act is ordinarily the "exclusive 
remedy" for certain statutorily defined injuries.  See La Crosse 
v. WERC, 182 Wis. 2d 15, 29-30, 513 N.W.2d 579 (1994).  See also 
Guse v. A.O. Smith Corp., 260 Wis. 403, 406-07, 51 N.W.2d 24 
(1952) ("In enacting the Act, the legislature intended to impose 
upon employers an absolute liability, regardless of fault; and 
in return for this burden, intended to grant employers immunity 
from all tort liability on account of injuries to employees."); 
Vick v. Brown, 255 Wis. 147, 153, 38 N.W.2d  716 (1949) ("[The 
employer's liability] is solely under the workmen's compensation 
law.  There is no liability in tort."). 
No. 
2004AP2588   
 
12 
 
of these statutes and the impact of these statutes on the 
present case.   
¶29 Gallagher 
Services 
contends 
that 
the 
Worker's 
Compensation Act provides an exclusive statutory remedy for an 
employee's claim of bad faith and disallows any recovery against 
Gallagher Services for both the statutory penalty for bad faith 
and damages in a tort claim.   
¶30 The nonparty brief of the Department joins Gallagher 
Services in this interpretation of the Act.  It cites to no 
previous interpretation of the statutes or regulation at issue.  
We need not give deference to the Department's interpretation of 
the statutory provisions in its nonparty brief in the present 
case because although the legislature has charged the Department 
with administering the Act and the Department promulgated the 
regulation, the Department has no experience in determining 
whether the Act bars a claim in circuit court against its agent 
for the agent's bad faith conduct in administering an injured 
employee's claims against an uninsured employer.  The regulation 
substantially 
incorporates 
the 
language 
of 
the 
statutory 
provisions, 
and 
the 
Department's 
interpretation 
of 
the 
regulation in its brief cannot be harmonized with the statutes.  
The Department's interpretation of its regulation in its 
nonparty brief is plainly erroneous and inconsistent with the 
statute, and therefore the Department's interpretation of its 
regulation in its brief does not control, nor will it be 
accorded great weight. 
No. 
2004AP2588   
 
13 
 
¶31 The plaintiff disagrees, of course, with Gallagher 
Services' 
interpretation 
of 
the 
Act. 
 
According 
to 
the 
plaintiff, the statutory penalties imposed upon an employer who 
has acted in bad faith do not apply to Gallagher Services.  The 
Act, according to the plaintiff, does not address Gallagher 
Services' liability for its acts of bad faith and therefore does 
not bar the plaintiff's bad faith tort claim against Gallagher 
Services.  
¶32 We agree with Gallagher Services.  Our interpretation 
of the statutes and regulation at issue is as follows: Reading 
Wis. Stat. § 102.81(1)(a) with the enumerated penalty and 
interest statutes and the regulation, we conclude that the 
Department must pay worker's compensation to an injured employee 
that an insured employer would have paid the injured employee 
but that neither the Department nor its agent has to pay an 
injured employee any of the penalties or interest that the 
listed statutes would have imposed on an insured employer or 
insurance 
carrier 
for 
their 
misconduct. 
The 
Worker's 
Compensation Act, however, does not address Gallagher Services' 
liability for its acts of bad faith and therefore does not bar 
the plaintiff's bad faith tort claim against Gallagher Services.   
IV 
¶33 In reaching our interpretation, we first examine Wis. 
Stat. § 102.81(1)(a) and the second sentence of Wis. Admin. Code 
§ DWD 80.62(7)(b).   
¶34 Wisconsin 
Stat. 
§ 102.81(1)(a) 
provides 
for 
the 
payment of worker's compensation claims to an employee when an 
No. 
2004AP2588   
 
14 
 
employer is uninsured.  The statute requires that the Department 
of 
Workforce 
Development15 
pay 
an 
injured 
employee 
the 
compensation owed by the uninsured employer under chapter 102.  
The Department need not, however, pay to the employee those 
penalties and interest due under §§ 102.16(3), 102.18(1)(b) and 
(bp), 102.22(1), 102.34(3), 102.57, and 102.60.  Thus, to 
understand the extent of the Department's obligation to an 
injured employee of an uninsured employer under § 102.81(1)(a), 
we must examine the excepted penalty and interest provisions 
listed therein.      
¶35 Wisconsin Stat. § 102.81(1)(a) reads in relevant part 
as follows: 
If an employee of an uninsured employer . . . suffers 
an injury for which the uninsured employers fund is 
liable 
under 
s. 
102.03, 
the 
department 
or 
the 
department's reinsurer shall pay to or on behalf of 
the injured employee or to the employee's dependents 
an amount equal to the compensation owed them by the 
uninsured employer under this chapter except penalties 
and interest due under ss. 102.16(3), 102.18(1)(b) and 
(bp), 102.22(1), 102.35(3), 102.57, and 102.60.    
¶36 The 
second 
sentence 
of 
Wis. 
Admin. 
Code 
§ DWD 
80.62(7)(b) 
(the 
regulation 
adopted 
by 
the 
Department 
implementing Wis. Stat. § 102.81(1)(a)) is substantially the 
same as the "except" language of Wis. Stat. § 102.81(1)(a).  The 
second sentence of § DWD 80.62(7)(b) incorporates by reference 
the 
same 
enumerated 
statutes 
as 
listed 
in 
Wis. 
Stat. 
§ 102.81(1)(a).  The regulation makes clear that neither the 
                                                 
15 Wis. Stat. § 102.01(2)(ap). 
No. 
2004AP2588   
 
15 
 
Department nor its agent, here Gallagher Services, is liable for 
the penalties and interest set forth in the statutory provisions 
listed in both the statute and regulation.  The second sentence 
of the regulation states in relevant part: 
The department or its agent is not liable for 
penalties and interest due under ss. 102.16(3), 102.18 
(1)(b) and (bp), 102.22(1), 102.35(3), 102.57 and 
102.60, Stats. 
¶37 To understand what the Department or its agent need 
not pay from the Uninsured Employers Fund under Wis. Stat. 
§ 102.81(1)(a) and the second sentence of Wis. Admin Code § DWD 
80.62(7)(b), we must examine the statutory penalty and interest 
provisions listed therein.  
¶38 We 
turn 
our 
attention 
first 
to 
Wis. 
Stat. 
§ 102.18(1)(bp), which provides a penalty for bad faith conduct. 
Gallagher Services insists that Wis. Stat. § 102.81(1)(a) read 
with § 102.18(1)(bp) establishes an employee's exclusive remedy 
for a bad faith claim but exempts Gallagher Services from any 
penalty for its bad faith. 
¶39 Wisconsin 
Stat. 
§ 102.18(1)(bp) 
authorizes 
the 
Department to include a penalty in an award to an employee for 
each event of malice or bad faith of an employer or insurance 
carrier in suspending, terminating, or failing to make payments 
or in failing to report an injury.  By its plain language, 
§ 102.18(1)(bp) 
does 
not 
bestow 
upon 
the 
Department 
the 
authority to assess a penalty against itself or its agent.  
Wisconsin Stat. § 102.18(1)(bp) characterizes the penalty as the 
No. 
2004AP2588   
 
16 
 
exclusive remedy against an employer or insurance carrier for 
malice or bad faith.   
¶40 Wisconsin Stat. § 102.18(1)(bp) states in relevant 
part:  
The department may include a penalty in an award to an 
employee if it determines that the employer's or 
insurance carrier's suspension of, termination of or 
failure to make payments or failure to report injury 
resulted from malice or bad faith.  This penalty is 
the exclusive remedy against an employer or insurance 
carrier for malice or bad faith. . . . The department 
may assess the penalty against the employer, the 
insurance carrier or both.  Neither the employer nor 
the insurance carrier is liable to reimburse the other 
for the penalty amount.  The department may, by rule, 
define actions which demonstrate malice or bad faith.   
¶41 The text of Wis. Stat. § 102.18(1)(bp) explicitly 
deals solely with the malice and bad faith of an "employer or 
insurance carrier."16   
¶42 First, the only situation in which the Department may 
award a penalty under Wis. Stat. § 102.18(1)(bp) is when the 
Department determines that the employer or insurance carrier has 
acted with malice or bad faith.   
¶43 Second, Wis. Stat. § 102.18(1)(bp) announces that the 
penalty for malice or bad faith is "the exclusive remedy against 
an employer or insurance carrier for malice or bad faith."  It 
does not announce that it is the exclusive remedy against the 
Department or its agent for malice or bad faith.   
¶44 Third, Wis. Stat. § 102.18(1)(bp) states that "[t]he 
department may assess the penalty against the employer, the 
                                                 
16 Wis. Stat. § 102.18(1)(bp).   
No. 
2004AP2588   
 
17 
 
insurance carrier or both" and that "[n]either the employer nor 
the insurance carrier is liable to reimburse the other for the 
penalty amount."  It makes no reference to assessing a penalty 
against the Department or its agent.    
¶45 In sum, we conclude that Wis. Stat. § 102.18(1)(bp) 
does not govern the conduct of the Department or its agent and 
does not impose any penalty on the Department or its agent for 
bad faith conduct.  This interpretation of § 102.18(1)(bp) is 
affirmed by Wis. Admin. Code DWD 80.70, the administrative 
regulation 
adopted 
by 
the 
Department 
(as 
authorized 
by 
§ 102.18(1)(bp)) to define "malice" and "bad faith."  The 
Department specifically defines "bad faith" and "malice" as 
these terms relate to the conduct of an employer, an insurance 
company, and a self-insured employer.         
¶46 Our interpretation of Wis. Stat. § 102.18(1)(bp) is 
further affirmed by an analysis of the other penalty and 
interest provisions enumerated in Wis. Stat. § 102.81(1)(a) as 
penalties and interest that the Department and its agent need 
not pay.   We conclude that none of these provisions governs the 
conduct of the Department or its agent.   
¶47 At best, only three of the seven statutory provisions 
listed in Wis. Stat. § 102.81(1)(a) and Wis. Admin Code § DWD 
80.62(7)(b) involve conduct that the Department or its agent 
might engage in while administering the Uninsured Employers 
Fund, but the texts of these provisions expressly limit their 
application to entities other than the Department or its agents.  
No. 
2004AP2588   
 
18 
 
The other four provisions could never implicate the Department 
or its agent. 
¶48 Three penalties limit their application to employers 
and their insurers.  Wisconsin Stat. § 102.22(1) imposes 
penalties and interest on the employer or its insurer for 
delayed payment.17  Wisconsin Stat. § 102.18(1)(b) imposes a 
penalty on an employer or its insurer for bad faith failure to 
pay compensation ordered by the Department in an interlocutory 
award.  
Wisconsin 
Stat. § 102.18(1)(bp), discussed above, 
imposes a penalty on an employer or its insurer for bad faith 
conduct or malice.   
¶49 Although the plaintiff asserts that Gallagher Services 
engaged in conduct that may have violated one or more of these 
provisions, these provisions by their very terms are limited in 
application to "employers" or "insurers."  Gallagher Services is 
neither.  The texts of the three statutes penalize an employer's 
or an insurer's conduct, not the conduct of the Department or 
its agent.  These provisions cannot be extended to apply to the 
Department or its agent without rewriting the statutes. 
¶50 Moreover, 
the other four enumerated penalty and 
interest provisions address the conduct of an employer, not the 
                                                 
17 Wisconsin Stat. § 102.22(1) states in relevant part:  "If 
the employer or his or her insurer inexcusably delays in making 
the first payment that is due an injured employee for more than 
30 days after the day on which the employee leaves work as a 
result of an injury and if the amount due is $500 or more, the 
payments as to which the delay is found shall be increased by 
10%." 
No. 
2004AP2588   
 
19 
 
Department or its agent.  For example, Wis. Stat. § 102.16(3) 
bars, 
inter 
alia, 
an 
employer 
from 
recouping 
worker's 
compensation payments from the injured employee; the penalty for 
violation is stated in § 102.85.  Wisconsin Stat. § 102.35(3) 
imposes liability to an employee for the employee's wages on an 
employer who without reasonable cause refuses to rehire an 
injured employee.  Wisconsin Stat. § 102.57 imposes penalties on 
an employer for injuries caused by an employer's failure to 
comply with any statute, rule, or order of the department.  
Wisconsin Stat. § 102.60 increases a worker's compensation award 
to be paid by an employer who illegally employs a minor.  None 
of these provisions applies to conduct within the Department's 
or its agent's sphere of activity.  They all relate to an 
employer. 
¶51 If 
the 
legislature 
had 
intended 
to 
exempt 
the 
Department or its agent from liability for bad faith conduct, 
the legislature could have done so explicitly.  Instead, the 
legislature specifically lists seven statutory provisions that 
increase a worker's compensation award to an injured employee 
because of an employer's or an insurer carrier's misconduct and 
then clearly provides that the Department is not required to pay 
these increased amounts to an injured employee of an uninsured 
employer. 
¶52 Our interpretation of the statutes and regulation at 
issue is affirmed by what we view as the acid test for 
determining the meaning of Wis. Stat. § 102.81(1)(a)'s (and Wis. 
Admin Code § DWD 80.62(7)(b)'s) reference to § 102.18(1)(bp): 
No. 
2004AP2588   
 
20 
 
Incorporate the text of § 102.18(1)(bp) into § 102.81(1)(a) in 
lieu 
of 
§ 102.81(1)(a)'s 
mere 
statutory 
reference 
to 
§ 102.18(1)(bp).   
¶53 The combined texts of the two statutory provisions 
clearly demonstrate that the Department is exempt from paying an 
injured employee the penalty an employer or an insurance carrier 
incurs for bad faith conduct.  The combined texts say nothing 
about the bad faith of the Department or its agent.   
¶54 The combined texts of Wis. Stat. § 102.81(1)(a) and 
§ 102.18(1)(bp) read as follows: 
If an employee of an uninsured employer . . . suffers 
an injury for which the uninsured employers fund is 
liable 
under 
s. 
102.03, 
the 
department 
or 
the 
department's reinsurer shall pay to or on behalf of 
the injured employee or to the employee's dependents 
an amount equal to the compensation owed them by the 
uninsured employer under this chapter except penalties 
and 
interest 
due 
under . . . 102.18(1) . . . (bp), 
[which provides that] the department may include a 
penalty in an award to an employee if it determines 
that the employer's or insurance carrier's suspension 
of, termination of or failure to make payments or 
failure to report injury resulted from malice or bad 
faith.  This penalty is the exclusive remedy against 
an employer or insurance carrier for malice or bad 
faith. . . . The department may assess the penalty 
against the employer, the insurance carrier or both.  
Neither the employer nor the insurance carrier is 
liable to reimburse the other for the penalty amount.  
The department may, by rule, define actions which 
demonstrate malice or bad faith. 
¶55 Our interpretation of the statutes is also supported 
by the public policy rationale underlying the statutes and 
regulation excusing the Department and its agent from paying the 
penalties and interest imposed on an employer or insurance 
No. 
2004AP2588   
 
21 
 
carrier by the statutory provisions listed in Wis. Stat. 
§ 102.81(1)(a).  Section 102.81(1)(a) is a compromise for the 
benefit of employees of uninsured employers.  The employees 
receive worker's compensation benefits from the Uninsured 
Employers Fund but do not receive from the Uninsured Employers 
Fund the penalties and interest that are ordinarily assessed 
against an employer who has engaged in misconduct. 
¶56 Furthermore, these enumerated penalty and interest 
provisions are designed to deter employers and insurers from 
misconduct.  If the Department pays these penalties and interest 
from the Uninsured Employers Fund, little if any deterrent 
effect on employers is achieved.  Moreover, any such payment of 
these penalties and interest from the Uninsured Employers Fund 
depletes the assets of the Uninsured Employers Fund available to 
injured employees.   
¶57 Gallagher Services also argues, however, that the 
first sentence of Wis. Admin. Code § DWD 80.62(7)(b) makes clear 
that the Worker's Compensation Act protects it from liability 
for bad faith by treating the Department or its agent exactly 
like insurers.  Gallagher Services reasons that an insurer is 
liable only for the exclusive statutory penalty for its bad 
faith, not for a bad faith tort, and that the first sentence of 
the regulation expressly grants Gallagher Services the rights of 
an insurer.  Gallagher Services further reasons that having been 
granted the rights of an insurer it is not liable in a tort 
action for bad faith and that furthermore it is not liable for 
the exclusive statutory penalty for its bad faith because it is 
No. 
2004AP2588   
 
22 
 
expressly exempted by the statute and regulation from the 
statutory penalty.  The nonparty brief of the Department does 
not join Gallagher Services in this interpretation of the first 
sentence of DWD § 80.62(7)(b).      
¶58 To evaluate Gallagher Services' reasoning, we begin 
with the text of the first sentence of the administrative 
regulation, Wis. Admin. Code § DWD 80.62(7)(b).  It states that 
"the department or its agent shall have the same rights and 
responsibilities in administering claims under ch. 102, Stats., 
as an insurer authorized to do business in this state."18  This 
language, however, does not mean that Gallagher Services, as the 
administrator of claims against the Uninsured Employers Fund 
(and as an agent of the Department), is an "insurer" or that 
Gallagher Services will be treated as an "insurer" for all 
purposes.  In other words, the regulation does not, and cannot, 
without a statutory basis, transform the Department or its agent 
into an "insurer" under chapter 102.   
¶59 The limited meaning of this sentence of the regulation 
is made clear when examining the stated purpose of Wis. Admin. 
Code § DWD 80.62.  The stated purpose of this regulation "is to 
clarify the department's procedures for handling claims for 
compensation to injured workers under s. 102.81(1), Stats."19  
                                                 
18 Wis. Admin. Code § DWD 80.62(7)(b) (emphasis added). 
19 Wis. Admin. Code § DWD 80.62(1).   
No. 
2004AP2588   
 
23 
 
The Department has authority under the Act to "adopt its own 
rules of procedure."20    
¶60 Sections 102.80 through 102.87 governing the Uninsured 
Employers Fund do not set forth detailed procedures for how the 
Department or its agent shall process, investigate, and pay 
claims to injured employees of uninsured employers.  In 
contrast, other provisions of chapter 102 provide more explicit 
guidance to an insurance carrier for administering claims.  
¶61 The first sentence of the regulation must therefore be 
read as merely acknowledging that the Department or its agent in 
administering claims against the Uninsured Employers Fund has 
the applicable administrative rights and responsibilities of 
insurers in this state who process, investigate, and pay claims 
under chapter 102.    
¶62 Thus, for example, under Wis. Stat. § 102.123, the 
agent has an insurer's responsibility to provide to an employee 
a copy of the employee's statement.  Under § 102.13(1)(a) and 
(am), the agent has an insurer's right to have an employee 
submit to reasonable medical and vocational examinations.  Under 
§ 102.13(1)(b), the agent has an insurer's responsibility to 
tender to an employee all necessary expenses for examinations.   
¶63 The first sentence of § DWD 80.62(7)(b) establishes 
nothing more than rights and responsibilities of the Department 
or agent in administering claims.  It does not, as Gallagher 
Services argues, grant substantive immunity to the agent for a 
                                                 
20 Wisconsin Stat. § 102.15(1). 
No. 
2004AP2588   
 
24 
 
bad faith tort claim.  Any such immunity would be inconsistent 
with the texts of the statutes and the regulation.  
¶64 Consistent 
with 
our 
discussion 
of 
Wis. 
Stat. 
§§ 102.81(1)(a) and 102.18(1)(bp) and the second sentence of 
Wis. Admin. Code § DWD 80.62(7)(b), we conclude that the first 
sentence of § DWD 80.62(7)(b) does not exempt Gallagher Services 
from liability for the tort of bad faith.   
¶65 Not a single sentence in the Worker's Compensation Act 
refers to the bad faith conduct of the Department or its agent.  
The sole bad faith statutory remedy in the Worker's Compensation 
Act is set forth in Wis. Stat. § 102.18(1)(bp), which by its 
very text applies to the bad faith of an employer or an 
employer's insurer.  The text of Wis. Stat. § 102.18(1)(bp) 
explicitly deals solely with the malice and bad faith of an 
"employer or insurance carrier."21   
¶66 The statutory penalty in § 102.18(1)(bp) constitutes 
the "exclusive remedy" for the bad faith conduct of an employer 
or an insurance carrier.  Because Wis. Stat. § 102.18(1)(bp) 
does not apply to Gallagher Services, the Act does not provide 
an "exclusive remedy" for Gallagher Services' alleged bad faith 
misconduct.  Moreover, § 102.81(1)(a) exempts the Department and 
its agent from paying an employee the statutory penalties and 
interest imposed on an employer or an insurance carrier for 
their misdeeds.  Nothing in section 102.81(1)(a) exempts the 
                                                 
21 Wisconsin Stat. § 102.18(1)(bp).   
No. 
2004AP2588   
 
25 
 
Department or its agent from liability for its bad faith conduct 
in processing claims.  
¶67 In sum, we hold that Wis. Stat. §§ 102.81(1)(a) and 
102.18(1)(bp) of the Worker's Compensation Act and Wis. Admin. 
Code § DWD 80.62(7)(b) do not govern an injured employee's  
claim for the alleged bad faith conduct of Gallagher Services. 
¶68 Having thus determined that the Worker's Compensation 
Act does not provide a remedy for the bad faith conduct of 
Gallagher Services, we must next examine whether the plaintiff's 
bad faith tort claim against Gallagher Services is otherwise 
recognized by or barred by the Act.  
V 
¶69 A review of the case law regarding bad faith claims 
against insurance companies and the "exclusive remedy" provision 
of the Worker's Compensation Act makes clear that the case law 
has recognized the tort of bad faith against a worker's 
compensation insurance carrier and that the Act's exclusivity 
provision does not bar the tort of bad faith.   
¶70 The seminal cases on bad faith tort claims against 
insurance companies are Anderson v. Continental Insurance Co., 
85 Wis. 2d 675, 271 N.W.2d 368 (1978), and Coleman v. American 
Universal Insurance Co., 86 Wis. 2d 615, 273 N.W.2d 220 (1979). 
¶71 In Anderson, the court recognized a common law cause 
of action against an insurer for acting in bad faith when 
No. 
2004AP2588   
 
26 
 
processing a claim.  The Anderson court determined that the tort 
of bad faith is an intentional tort.22 
¶72 A year later, in Coleman, a worker's compensation 
claimant alleged that the defendants, the worker's compensation 
insurer and its adjusting company, acted in bad faith in 
arbitrarily 
and 
capriciously 
denying 
him 
rightfully 
owed 
worker's compensation benefits, thereby injuring him by the bad 
faith denial and delay of worker's compensation payments.23  In 
response, the defendants moved for summary judgment on the 
ground that the claimant's exclusive remedy was under the 
Worker's Compensation Act, and therefore, the courts had no 
jurisdiction to entertain this tort action.   
¶73 The 
Coleman 
court 
determined 
that 
the 
Worker's 
Compensation Act, as it existed before the enactment of Wis. 
Stat. § 102.18(1)(bp), failed to offer a remedy for the 
insurance company's misconduct.  As the Coleman court explained, 
"if the injury is one covered by the Worker's Compensation Act, 
the compensation remedy is exclusive.  If [the injury] is not so 
covered, the fact that a worker's compensation remedy exists for 
a separate injury is irrelevant."24   
¶74 The Coleman court concluded that the bad faith 
"injury" alleged in Coleman was separate and distinct from the 
                                                 
22 Anderson v. Cont'l Ins. Co., 85 Wis. 2d 675, 691-92, 271 
N.W.2d 368 (1978). 
23 Coleman v. Am. Universal Ins. Co., 86 Wis. 2d 615, 619, 
273 N.W.2d 220 (1979).   
24 Coleman, 86 Wis. 2d at 622. 
No. 
2004AP2588   
 
27 
 
original job-related injury and thus was not addressed by the 
Worker's Compensation Act.25  Accordingly, the Coleman court held 
that, under the circumstances of Coleman, "the separate tort of 
bad faith may be alleged and proved in the courts."26  In other 
words, "where a worker's compensation insurer acts in bad faith 
in the settlement or payment of compensation benefits, a 
separate tort is committed that is not within the purview of the 
exclusivity 
provisions 
of 
the 
worker's 
compensation 
law . . . ."27    
¶75 The 
legislature was apparently unhappy with the 
Coleman decision and revised the statutes to respond to 
Coleman.28  It created Wis. Stat. § 102.18(1)(bp) in 1981 that 
specifically and explicitly provided an "exclusive remedy" in 
the Worker's Compensation Act for bad faith claims against 
                                                 
25 The Coleman court determined that the injury "had its 
genesis in conduct by the insurer that arose not out of the 
employment but out of the contractual obligation of the insurer 
to pay."  Coleman, 86 Wis. 2d at 623.  The court reasoned that 
"[t]he injury for which remedy is sought in the instant case is 
the emotional distress and other harm caused by the defendants' 
intentional acts during the investigation and during the course 
of payment of the claim.  This claimed injury was distinct in 
time and place from the original on-the-job physical injury 
which was subject to the Compensation Act."  Id.  
26 Coleman, 86 Wis. 2d at 620. 
 
27 Id. 
28 Kimberly-Clark Corp. v. LIRC, 138 Wis. 2d 58, 62-63, 405 
N.W.2d 684 (Ct. App. 1987); Jadofsky v. Iowa Kemper Ins. Co., 
120 Wis. 2d 494, 497-98, 355 N.W.2d 550 (Ct App. 1984). 
No. 
2004AP2588   
 
28 
 
employers and their insurers.29  This exclusive remedy statute 
makes no reference to the bad faith conduct of the Department or 
its agent, as we explained previously.  
¶76 Gallagher Services contends that the existence of Wis. 
Stat. § 102.18(1)(bp) imposing a statutory penalty for the bad 
faith acts of an employer and an insurance carrier distinguishes 
this case from Coleman.  We disagree with this contention. 
¶77 Although 
the 
legislature 
adopted 
Wis. 
Stat. 
§ 102.18(1)(bp) governing bad faith in worker's compensation 
cases, this statute is a limited one, providing a limited 
alternative exclusive remedy against an employer and its insurer 
on an employee's bad faith claim.  The limited exclusive 
statutory remedy is a bad faith penalty awarded to an injured 
employee, in lieu of the employee's seeking an unlimited jury 
award in circuit court.  The statute does not address any and 
all claims of bad faith alleged by an injured employee.  It 
specifically addresses only injuries caused by the bad faith of 
employers and their insurance companies. 
¶78 No Uninsured Employers Fund existed in 1981 and 
therefore 
the 
legislature 
could 
not 
have 
intended 
§ 102.18(1)(bp) to apply to the Department and the Uninsured 
Employers Fund.  The legislature did not amend § 102.18(1)(bp) 
when it created the Uninsured Employers Fund to address the bad 
faith of the Department or an agent of the Department in 
                                                 
29 This court has recognized this exclusive remedy for bad 
faith claims in worker's compensation matters.  Brown v. LIRC, 
2003 WI 142, ¶23, 267 Wis. 2d 31, 671 N.W.2d 279. 
No. 
2004AP2588   
 
29 
 
administering claims against the Uninsured Employers Fund.  And 
why not?  Probably because no one imagined that the bad faith of 
the Department or its agent in administering claims would be an 
issue.  Why would the Department or its agent commit the 
intentional tort of bad faith when no profit or any other motive 
exists for such intentional wrongdoing?   
¶79 There is no doubt that the legislature intended the 
Worker's Compensation Act to be the exclusive mechanism for 
handling injuries that fall within its ambit.  Here, as we have 
explained, the plaintiff's bad faith claim against Gallagher 
Services falls outside the ambit of the Act.  In the present 
case, as in Coleman, the Worker's Compensation Act30 fails to 
offer the plaintiff any remedy at all for his claim of injury 
resulting from alleged bad faith conduct.  The Act does not 
explicitly bar the plaintiff from seeking damages against 
Gallagher Services for the intentional tort of bad faith.31 
¶80 We determine that the Act, the administrative code, 
and 
the 
Coleman 
case 
lead 
to 
the 
following 
unavoidable 
conclusions:  The Act does not explicitly bar the plaintiff's 
bad faith claim against Gallagher Services for its alleged bad 
faith in processing the claim.  The injury the plaintiff 
suffered resulting from Gallagher Services' alleged bad faith 
conduct 
occurred 
after 
the 
injury 
covered 
by 
the 
Act.  
                                                 
30 See, e.g., Wis. Stat. §§ 102.81(1)(a), 102.18(1)(bp); 
Wis. Admin. Code § DWD 80.62(7)(b). 
31 Id. 
No. 
2004AP2588   
 
30 
 
Accordingly, 
the 
plaintiff's 
injury 
allegedly 
caused 
by 
Gallagher Services was not an injury covered under the Act, and 
the plaintiff may seek relief in the courts for the tort of bad 
faith against Gallagher Services under the principles enunciated 
in Coleman.  Although Coleman involved a worker's compensation 
insurer, the principles enunciated therein apply to Gallagher 
Services, 
absent 
explicit 
statutory 
language 
barring 
the 
assertion of the tort of bad faith. 
¶81 Gallagher Services argues, however, that the law is 
clear under Borque v. Wausau Hospital Center, 145 Wis. 2d 589, 
427 N.W.2d 433 (Ct. App. 1988), that when the legislature enacts 
an 
administrative 
scheme 
to 
enforce 
a 
statute, 
the 
administrative mechanism is presumed exclusive unless there is 
an affirmative legislative indication of the contrary.  In 
Borque, the court of appeals stated: "[I]t is a fundamental 
principle of statutory construction that absent a legislative 
indication to the contrary, the legislature is deemed to have 
intended a comprehensive statutory remedy to be exclusive."32   
¶82 Although 
the 
Worker's 
Compensation 
Act 
is 
a 
comprehensive statutory remedy for injuries of employees, some 
injuries of employees remain outside the Act.  No comprehensive 
statutory scheme is set forth in the Act for dealing with an 
injured employee's bad faith tort claims against the Department 
or its agent.  Nothing in the Act reveals that the legislature 
                                                 
32 Borque v. Wausau Hosp. Center, 145 Wis. 2d 589, 594, 427 
N.W.2d 433 (Ct. App. 1988). 
No. 
2004AP2588   
 
31 
 
intended 
an 
injured 
employee's 
comprehensive 
worker's 
compensation remedy for injuries covered by the Act33 to exclude 
an employee's tort recovery against the Department or its agent 
for the agent's bad faith conduct in administering claims.  Bad 
faith is a common law tort.  If a statute is to eliminate the 
tort in derogation of the common law, it should explicitly so 
state.34    
¶83 The Department asserts in its nonparty brief public 
policy reasons for not applying Coleman in the present case.  It 
argues that it is in the public interest to preserve the 
Uninsured 
Employers 
Fund's 
assets 
to 
pay 
the 
worker's 
compensation claims of injured employees of uninsured employers.  
This public interest is jeopardized, it argues, by allowing the 
plaintiff to proceed in his tort claim for bad faith against 
Gallagher Services.  Although neither the Department nor its 
agent is authorized to pay the plaintiff's tort claim from the 
Uninsured Employers Fund, according to the Department, if the 
administrator is exposed to damages on bad faith tort claims, 
the Uninsured Employers Fund will in the future face higher 
                                                 
33 Wis. Stat. § 102.03(2). 
34 See Strenke v. Hogner, 2005 WI 25, ¶29, 279 Wis. 2d 52, 
694 N.W.2d 296 ("Statutes in derogation of the common law are to 
be strictly construed."); Kranzush v. Badger State Mut. Cas. 
Co., 103 Wis. 2d 56, 74, 307 N.W.2d 256 (1981) ("Statutes are 
not to be construed as changing thecommon law unless the purpose 
to effect such change is clearly expressed therein.") (internal 
citations omitted).  For commentary criticizing and limiting 
this rule of interpretation, see 3 Norman J. Singer, Statutes 
and Statutory Construction 61:4 at 247-50 (6th ed. 2001). 
No. 
2004AP2588   
 
32 
 
service fees by entities competing to become the administrator 
and 
greater 
difficulty 
in 
securing 
the 
services 
of 
an 
administrator.   
¶84 As a related point, the Department contends that 
imposing bad faith tort liability on the administrator will not 
accomplish the public policy of tort law to deter the wrongdoer 
from engaging in further misconduct, because any damages the 
Department's agent pays for its wrongdoing will eventually be 
passed on to the Uninsured Employers Fund. 
¶85 The Department's view of public policy is not the only 
view of public policy.  It is also arguable that imposing tort 
liability on the Department's agent for bad faith supports 
public policy and the deterrent goal of tort law.  It is 
contrary to the purposes of the Uninsured Employers Fund and the 
Worker's Compensation Act to hold that the Fund's administrator 
(an agent of the Department) has no duty to act in good faith to 
injured employees when administering claims.  It is also 
contrary to public policy to deny an injured employee relief 
against the Department's agent for a separate and distinct 
injury allegedly caused by its intentional tort of bad faith.   
¶86 Ultimately the Department concludes, and we agree, 
that the policy considerations regarding a plaintiff's bad faith 
tort claims against the administrator of the Uninsured Employers 
Fund are for the legislature.  We therefore rely on the texts of 
the statutes and the regulation to conclude that the plaintiff 
is not barred by the Act from pursuing a bad faith tort claim 
against Gallagher Services.  
No. 
2004AP2588   
 
33 
 
* * * * 
¶87 We conclude that the text of Wis. Stat. § 102.81(1)(a) 
and § 102.18(1)(bp) and Wis. Admin. Code § DWD 80.62.(7)(b) do 
not bar the plaintiff's bad faith tort claim against Gallagher 
Services.  Properly read, these provisions apply as follows in 
the present case:   
¶88 The Department or its agent must pay an amount equal 
to the worker's compensation owed to an injured employee for an 
injury for which the uninsured employer is liable.   
¶89 The Department and its agent are not, however, liable 
to pay an injured employee of an uninsured employer for the 
penalty statutorily imposed on the employer for bad faith 
conduct.   
¶90 These provisions at issue do not in any way govern the 
plaintiff's bad faith tort action against Gallagher Services.  
The Worker's Compensation Act does not provide any remedy to the 
plaintiff for his bad faith claim against Gallagher Services for 
its 
alleged 
bad 
faith 
conduct 
in 
processing 
a 
worker's 
compensation claim, let alone an exclusive remedy.   
¶91 The injury for which the plaintiff seeks relief in 
this tort action is the injury caused by Gallagher Services' bad 
faith handling of the injured employee's (the plaintiff's) 
worker's compensation claim against an uninsured employer.  This 
injury is separate and distinct from the original injury for 
which the uninsured employer and the Department are liable under 
the Worker's Compensation Act.   
No. 
2004AP2588   
 
34 
 
¶92 Our case law recognizes a bad faith tort claim against 
a worker's compensation insurer for an injury separate and 
distinct from the initial injury for which an employer is liable 
under the Act, even though the bad faith occurred during the 
processing of a worker's compensation claim.  The same reasoning 
applies to allow the plaintiff to pursue a bad faith tort action 
against Gallagher Services. 
¶93 The decision of the court of appeals is reversed.  We 
remand the cause to the circuit court to reinstate the complaint 
against Gallagher Services.  The plaintiff can pursue its tort 
claim of bad faith against Gallagher Services in accordance with 
the order of the circuit court. 
 
By the Court.—The decision of the court of appeals is 
reversed.  
 
No.  2004AP2588.jpw 
 
1 
 
¶94 JON P. WILCOX, J.   (dissenting).  In 1989 the 
legislature created the Uninsured Employer Fund (UEF) and the 
framework within which the Department of Workforce Development 
(DWD) administers it.1  1989 Wis. Act 64.  At the time, 
Wis. Stat. § 102.18(1)(bp)(1987-88) had been the law of the 
state for almost a decade.  When creating the UEF the 
legislature chose not to amend § 102.18(1)(bp) to include DWD 
and its agents as parties that could be penalized for their bad 
faith.  In the subsequent eight legislative sessions, the 
legislature has also chosen not to make such an amendment.   
¶95 Based on the legislature's policy choice, the Worker's 
Compensation Act (Act) does not provide a remedy for employees 
like Christopher Aslakson (Aslakson) alleging bad faith by an 
agent of DWD like Gallagher Bassett Services, Inc. (Gallagher 
Services).  Faced with a lack of a remedy, the court concludes 
that the common-law tort of bad faith applies.  Majority op., 
¶86.  That conclusion interferes with a policy decision made by, 
and properly left to, the legislature.  Accordingly, I dissent. 
I   
 ¶96 The interplay between court decisions and legislative 
action concerning bad faith and worker's compensation law is 
crucial 
to 
determining 
whether 
Aslakson 
is 
barred 
from 
maintaining a bad faith tort claim against Gallagher Services.  
                                                 
1 When the legislature enacted 1989 Wisconsin Act 64, it 
directed the Department of Industry, Labor and Human Relations 
(DILHR) to administer the Uninsured Employer Fund.  In 1996 the 
Department of Workforce Development (DWD) replaced DILHR.  This 
dissent uses "DWD" to refer to the entity in existence at the 
time pertinent to the context within which it is used. 
No.  2004AP2588.jpw 
 
2 
 
It leads to the conclusion that the legislature rejected the 
court recognized bad faith tort claim in the context of the Act.  
After derogating common law, and acting with full knowledge of 
existing law, the legislature made the policy choice not to 
amend § 102.18(1)(bp) to include DWD and its agents.  
A 
¶97 On October 31, 1978, this court recognized the tort of 
bad faith.  Anderson v. Cont'l Ins. Co., 85 Wis. 2d 675, 271 
N.W.2d 368 (1978).  The court "conclude[d] that, upon the 
pleading of appropriate facts, an insured may assert a cause of 
action in tort against an insurer for the bad faith refusal to 
honor a claim of the insured."  Id. at 680.   
¶98 In the same term, and just over two months later, this 
court considered whether an injured employee could bring a claim 
arising out of alleged bad faith conduct of parties that refused 
to honor his worker's compensation claim.  Coleman v. Am. 
Universal Ins. Co., 86 Wis. 2d 615, 623, 273 N.W.2d 220 (1979).   
The court concluded that the employee could bring a bad faith 
claim because at the time the Act did not cover the alleged 
injury.  Id. at 623.  In reaching its conclusion, the court 
noted the following: 
[T]his action is based not on the original work-
related injury but on a second and separate injury 
resulting from the intentional acts of the insurer and 
its agents while investigating and paying the claim.  
The Act does not cover the alleged injury, and the 
exclusivity provision does not bar the claim. 
No.  2004AP2588.jpw 
 
3 
 
Id.  Note the court's focus on whether the alleged injury had 
been addressed by the legislature.  The court did not focus on 
whether the Act covered a particular class of defendants.   
¶99 To determine that "[t]he Act did cover the alleged 
injury," the court considered the language of the Act in effect 
at the time of Coleman's injury.  Id. at 622.  The court quoted 
the exclusivity provision: "'Where such conditions exist the 
right to the recovery of compensation pursuant to this chapter 
shall be the exclusive remedy against the employer and the 
workman's 
compensation 
insurance 
carrier.'" 
Id. 
(quoting 
Wis. Stat. § 102.03(2)(1973-74)).  The court then listed the 
Wis. Stat. § 102.03(1)(1973-74) conditions that had to exist to 
make the worker's compensation remedy exclusive: 
"(1) Liability under this chapter shall exist against 
an employer only where the following conditions 
concur: 
(a) Where the employe sustains an injury. 
(b) Where, at the time of the injury, both the 
employer and employe are subject to the provisions of 
this chapter. 
(c) 1. Where, at the time of the injury, the 
employe is performing service growing out of and 
incidental to his employment. . . . 
(d) Where the injury is not intentionally self-
inflicted. 
(e) Where the accident or disease causing injury 
arises out of his employment." 
Id.  Determining that the alleged bad faith injury did not meet 
the conditions, the court concluded that the exclusivity 
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provision found in § 102.03(2) did not bar Coleman's bad faith 
claim.  Id. at 623. 
¶100 Beyond simply considering whether Coleman's alleged 
bad faith injury met the conditions of § 102.03(1), the court 
considered whether other provisions of Wis. Stat. ch. 102 (1973-
74) barred Coleman's claim.  Specifically, it concluded that 
Wis. Stat. § 102.22 (1973-74), which imposed a penalty for late 
payments, did not bar Coleman's claim.  Id. at 625.  The court 
adopted the holding of other courts that "the statutory penalty 
for inexcusably late payment does not bar additional remedies 
for an intentional wrong going beyond the mere late payment."  
Id. at 626.   
¶101 After a review of ch. 102, the court concluded that 
"[t]he plaintiff's claim for intentional wrongdoing is not 
covered."  Id.  At the time the court decided Coleman, ch. 102 
lacked any mention of a claim of bad faith like Coleman's.  In 
the absence of the legislature addressing the claim, the newly 
recognized tort of bad faith applied.      
B 
¶102 In 1981 the legislature responded to the court's 
Coleman decision by creating Wis. Stat. § 102.18(1)(bp)(1981-
82).  Majority op., ¶75.  When enactments of the legislature 
conflict with the common law, like § 102.18(1)(bp) did with 
Coleman, statutes prevail.  In re Voluntary Assignment of 
Milwaukee Sheep & Wool Co. v. Alm, 186 Wis. 320, 323, 202 
N.W.2d 693 (1925)(stating "where the statute in any respect 
changes the rule or order existing under the common law, such 
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provisions must prevail"); City of Madison v. DWD, 2002 WI App 
199, ¶30, 257 Wis. 2d 348, 651 N.W.2d 292.  However, for a 
statute to prevail, the change must be clearly expressed.  
Wisconsin Bridge & Iron Co. v. Indus. Comm'n, 233 Wis. 467, 474, 
290 N.W.2d 199 (1940); NBZ, Inc. v. Pilarski, 185 Wis. 2d 827, 
836, 520 N.W.2d 93 (Ct. App. 1994).  When a statute lacks a 
clear expression, courts strictly construe it.  Brown v. 
Loewenbach, 217 Wis. 379, 385, 258 N.W. 379 (1935); NBZ, 185 
Wis. 2d at 836.   
¶103 Wisconsin Stat. §  102.18(1)(bp) 
"specifically 
and 
explicitly provided an 'exclusive remedy' in the Worker's 
Compensation Act for bad faith claims against employers and 
their insurers," majority op., ¶75, in conflict with the court's 
recognition of the tort of bad faith in the context of the Act.  
Accordingly, it constitutes a derogation of common law.  The 
statute supplanted the tort of bad faith in the context of 
worker's compensation law.  Rather than injured employees having 
a common-law claim to litigate in the courts, the legislature 
granted DWD the power to penalize an employer or insurance 
carrier for malice or bad faith.   
¶104 While the Coleman court of 1978 accurately stated that 
"[t]he Act does not cover the alleged injury," Coleman, 86 
Wis. 2d at 623, the same could no longer be said after the 
legislature's 
creation 
of 
§ 102.18(1)(bp). 
 
In 
creating 
§ 102.18(1)(bp), the legislature spoke on how it desired for bad 
faith to be handled in the context of the Act.  Absent further 
action by the legislature, the tort of bad faith no longer 
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applied in worker's compensation law after the legislature 
enacted § 102.18(1)(bp).   
¶105 Contrary to the majority's assertion, this case is not 
like Coleman, majority op., ¶79, due to the enactment of 
§ 102.18(1)(bp).  In Coleman, the court could state that "[t]he 
Act does not cover the alleged injury" of bad faith.  Coleman, 
86 Wis. 2d at 623.  With the creation of § 102.l8(1)(bp), which 
covers an alleged injury of bad faith, the majority cannot rely 
on the same rationale used in Coleman.         
C 
¶106 Within 
ten 
years 
of 
creating 
Wis. Stat. § 102.18(1)(bp), 
the 
legislature 
created 
the 
Uninsured Employers Fund (UEF).  1989 Wis. Act 64, § 55.  Courts 
presume that the legislature acts with full knowledge of 
existing laws.  E.g. Peters v. Menard, Inc., 224 Wis. 2d 174, 
187, 589 N.W.2d 395 (1999).  Accordingly, it should be presumed 
that the legislature had a full understanding of worker's 
compensation law, including § 102.18(1)(bp), when it enacted Act 
64.  
¶107 Act 64 made over 45 changes to Wis. Stat. ch. 102.  
1989 Wis. Act 64.  One of the changes included 1989 Wis. Act 64, 
§ 37, which amended Wis. Stat. § 102.18(1)(bw).  Before Act 64, 
§ 102.18(1)(bw)(1987-88) read as follows: 
If 
an 
insurer 
or 
self-insured 
employer 
pays 
compensation to an employe in excess of its liability 
and another insurer is liable for all or part of the 
excess payment, the department may order the insurer 
or self-insured employer that is liable to reimburse 
the insurer or self-insured employer that made the 
excess payment. 
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Act 64 made the following changes to § 102.18(1)(bw): 
If an insurer or, a self-insured employer or, if 
applicable, 
the 
uninsured 
employers 
fund 
pays 
compensation to an employe in excess of its liability 
and another insurer is liable for all or part of the 
excess payment, the department may order the insurer 
or self-insured employer that is liable to reimburse 
the insurer or self-insured employer that made the 
excess payment 
or, if applicable, the uninsured 
employers fund. 
1989 Wis. Act 64, § 37.  The legislature apparently made the 
policy choice to amend § 102.18(1)(bw) to address its creation 
of the UEF in 1989 Wis. Act 64, § 55.      
¶108 One thing that the legislature did not do in enacting 
Act 64 was amend § 102.18(1)(bp).  See 1989 Wis. Act 64.  Even 
though the legislature was creating the UEF, which would put DWD 
and its agents in a position to process worker's compensation 
claims, it did not include DWD and its agents as parties that 
could 
be 
penalized 
for 
acting 
in 
bad 
faith 
under 
§ 102.18(1)(bp).  Based on the amendment to § 102.18(1)(bw), the 
subsection immediately below § 102.18(1)(bp) in the statutes, 
the legislature seemingly appreciated that the creation of the 
UEF would have an impact on various parts of ch. 102.  Yet, the 
legislature chose not to amend § 102.18(1)(bp) when it created 
the UEF.  It also chose not to amend § 102.18(1)(bp) in the 
eight legislative sessions since it created the UEF.    
¶109 The legislature is the branch of government suited for 
making such policy decisions.  "'Public policy on a given 
subject is determined either by the constitution itself or by 
statutes passed within constitutional limitations. . . . When 
acting 
within 
constitutional 
limitations, 
the 
legislature 
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8 
 
settles and declares the public policy of a state, and not the 
court.'"  Progressive N. Ins. Co. v. Romanshek, 2005 WI 67, ¶60, 
281 Wis. 2d 300, 697 N.W.2d 417 (quoting Borgnis v. Falk Co., 
147 Wis. 327, 351, 133 N.W. 209 (1911)).  "[W]hen the 
legislature has acted, 'the judiciary is limited to applying the 
policy the legislature has chosen to enact, and may not impose 
its own policy choices.'"  Id. (quoting Fandrey v. Am. Family 
Mut. Ins. Co., 2004 WI 62, ¶16, 272 Wis. 2d 46, 680 N.W.2d 345). 
¶110 Based on the legislature's derogation of common law 
when it created § 102.18(1)(bp), injured employees alleging bad 
faith are barred from maintaining a common law bad faith claim.  
Based on the legislature's decision not to amend § 102.18(1)(bp) 
to include DWD and its agents for nine consecutive sessions, DWD 
and its agents are not subject to a bad faith penalty.  
Following the well-established rules about the derogation of 
common law and the presumption that the legislature acts with 
full knowledge of the law, one would conclude that until the 
legislature acts to indicate otherwise, injured employees 
alleging bad faith against DWD or its agents are left without a 
remedy. 
II 
¶111 After the legislature rebuffed this court's conclusion 
that the tort of bad faith should apply in the context of 
worker's compensation law, it sent a message about its policy 
choice.  When the legislature decided not to include DWD and its 
agents as parties subject to § 102.18(1)(bp) penalties for nine 
consecutive sessions, it sent a message about its policy choice.  
No.  2004AP2588.jpw 
 
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In spite of this message, the court has made it own policy 
decision.    
¶112 For the forgoing reasons, I respectfully dissent. 
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