Title: Rhonda Neff v. James Pierzina

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2001 WI 95 
 
SUPREME COURT OF WISCONSIN 
 
 
Case No.: 
99-1069 
 
 
Complete Title 
of Case: 
 
Rhonda Neff and Randy Neff,  
 
Plaintiffs-Appellants-Cross-Respondents- 
 
Petitioners, 
 
v. 
James Pierzina, Wilson Mutual Insurance Company, 
Anton Johnson, d/b/a T.J. Doc's, West Central 
Mutual Insurance and David Schiesl,  
 
Defendants-Cross-Respondents, 
American Family Mutual Insurance Company,  
 
Defendant-Respondent-Cross-Appellant.  
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
Reported at 236 Wis. 2d 276, 616 N.W.2d 525 
 
 
(Ct. App. 2000-Unpublished) 
 
 
Opinion Filed: 
July 9, 2001 
Submitted on Briefs: 
      
Oral Argument: 
January 10, 2001 
 
 
Source of APPEAL 
 
COURT: 
Circuit 
 
COUNTY: 
Trempealeau 
 
JUDGE: 
John A. Damon 
 
 
JUSTICES: 
 
Concurred: 
      
 
Dissented: 
      
 
Not Participating:       
 
 
ATTORNEYS: 
For the plaintiffs-appellants-cross respondents-
petitioners there were briefs by Dean R. Rohde and Bye, Goff & 
Rohde, Ltd., River Falls, and oral argument by Dean R. Rohde. 
 
 
For the defendant-respondent-cross appellant 
there was a brief by Beverly Wickstrom and Misfeldt, Richie, 
 
2 
Wickstrom & Wachs, Eau Claire, and oral argument by Beverly 
Wickstrom. 
 
2001 WI 95 
 
NOTICE 
This opinion is subject to further editing and 
modification.  The final version will appear 
in the bound volume of the official reports. 
 
 
No. 99-1069 
 
STATE OF WISCONSIN                    :  
  IN SUPREME COURT 
 
 
Rhonda Neff and Randy Neff,  
 
          Plaintiffs-Appellants-Cross- 
          Respondents-Petitioners, 
 
     v. 
 
James Pierzina, Wilson Mutual Insurance  
Company, Anton Johnson, d/b/a T.J. Doc's,  
West Central Mutual Insurance and David  
Schiesl,  
 
          Defendants-Cross-Respondents, 
 
American Family Mutual Insurance Company,  
 
          Defendant-Respondent-Cross- 
          Appellant. 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed. 
 
¶1 
DAVID T. PROSSER, J.   This case arises out of an 
elevator accident in Arcadia, Wisconsin, on July 8, 1996.  The 
plaintiffs, Rhonda and Randy Neff, allege that David Schiesl was 
among those responsible for the accident in which Rhonda Neff 
suffered injuries.  The Neffs contend that American Family 
Mutual 
Insurance 
Company 
(American 
Family) 
must 
provide 
FILED 
 
JUL 9, 2001 
 
Cornelia G. Clark 
Clerk of Supreme Court 
Madison, WI 
 
 
 
 
 
No. 99-1069   
 
 
2 
liability insurance coverage to Schiesl under a renter's policy 
issued to Schiesl's wife. 
¶2 
After a trial on the issue of coverage, the circuit 
court for Trempealeau County, John A. Damon, Judge, found that 
Schiesl had breached his obligation to provide American Family 
with timely notice of the accident and that his breach 
prejudiced American Family.  This determination eliminated 
coverage.  The court of appeals affirmed the circuit court's 
decision, and we agreed to review the court's unpublished 
opinion, Neff v. Pierzina, No. 99-1069, unpublished slip op. 
(Wis. Ct. App. Apr. 4, 2000). 
¶3 
The issues presented in this case are whether Schiesl 
breached his duty to provide American Family with timely notice 
that he was involved in an accident, and if he did, whether his 
breach of duty prejudiced the insurer.  This inquiry requires us 
to consider the proper standard of review of a circuit court's 
findings that an insured did not provide timely notice to an 
insurer and that this breach of duty was prejudicial. 
¶4 
We conclude that the proper standard of review of a 
circuit court's findings relating to timely notice and prejudice 
is the clearly erroneous standard.  In this case, the circuit 
court's findings regarding timely notice and prejudice are not 
clearly erroneous.  They are supported by the pertinent 
evidence.  Accordingly, we affirm the decision of the court of 
appeals. 
 
I. FACTUAL BACKGROUND 
No. 99-1069   
 
 
3 
 
 
¶5 
To appreciate the issues in this case, we must review 
the relationships among the parties and the setting of the 
accident because they form the basis for the Neffs' action. 
¶6 
All the people involved in this case were friends or 
acquaintances at time of the accident.  David Schiesl, Anton 
"Tony" Johnson, and James Pierzina were friends and contiguous 
neighbors; Schiesl and Johnson were close friends.  
¶7 
The Neffs were friends of Johnson.  Randy Neff is 
Johnson's former brother-in-law.  Johnson served as the best man 
at the Neffs' wedding.  Schiesl was acquainted with Randy Neff 
because of hunting parties, but he did not meet Rhonda Neff 
until the day of the accident.  
¶8 
At the time of the accident, Schiesl worked in 
association with Johnson in the used appliance sales and repair 
trade, in a business called T.J. Doc's Used Appliances and More 
(T.J. Doc's).  The business was named "T.J. Doc's" by Johnson to 
represent 
his 
unofficial 
initials, 
"T.J.," 
and 
Schiesl's 
nickname, "Doc."  The business was created in December 1995, and 
Johnson provided the investment capital for the enterprise.  In 
addition to their T.J. Doc's association, Johnson and Schiesl 
worked together in a full-time capacity at Pat's Country Market 
in Arcadia.  
¶9 
James Pierzina owned a barn or shed-type building that 
was known as the "chicken coop."  There was a "homemade" 
elevator in the chicken coop that enabled people to go up to a 
second floor.  Pierzina rented the second floor to Johnson for 
No. 99-1069   
 
 
4 
$100 per month.  T.J. Doc's used the second floor to store used 
appliances that were to be repaired or used for parts. 
¶10 T.J. Doc's conducted business out of a "pole building" 
or "pole shed" that Schiesl and others helped Johnson construct 
on Johnson's property.  The pole shed was about the size of a 
two-car garage and had a single overhead door much like an 
automobile garage.  The building served not only as the home of 
T.J. Doc's, but also as a place for "hanging out and watching 
TV, and having a few beers and talking" for Johnson and Schiesl, 
as well as other neighbors and friends.  
¶11 T.J. Doc's was generally open for business from around 
5:00 or 5:30 p.m. until 8:00 p.m. on all weekdays except 
Wednesday.  In essence, T.J. Doc's was an after-work business 
for Johnson and Schiesl and it was never intended to yield a 
sizable profit.1  In 1996 Schiesl had about $600 of income from 
the business. 
¶12 Johnson rented the second floor of the chicken coop on 
July 1, 1996.  One week later, on the day of the accident, there 
were about 15 to 20 appliances stored on the second floor of the 
building and around 30 appliances sitting in Johnson's yard.  
                     
1 Initially, Johnson and Schiesl discussed becoming partners 
in this business.  After Johnson met with an accountant, 
however, the two men decided that Schiesl would operate as "an 
independent contractor" or a "subcontractor."  Schiesl initially 
received a 20 percent commission on sales of refurbished 
appliances, but his commission later grew to 25 percent, and he 
also received a 50 percent commission on repair charges for 
appliances. 
No. 99-1069   
 
 
5 
¶13 At some point on July 8, Randy Neff contacted Johnson 
asking to borrow his truck and trailer to move some lumber.  
Johnson agreed.  Later in the day when Randy and Rhonda Neff 
came to T.J. Doc's for the truck, either Johnson or Schiesl 
asked Neff to drive Schiesl to downtown Arcadia to pick up some 
appliances because Schiesl did not have a valid driver's 
license.  Randy Neff's use of the truck was not conditioned on 
his escorting Schiesl to pick up the appliances, but Neff 
complied with the request.  While Schiesl and Neff went out on 
this trip, Rhonda Neff stayed behind at T.J. Doc's to answer the 
telephone in the event a customer called or to direct a customer 
to Johnson, who was nearby in his house fixing dinner. 
¶14 When Randy Neff and Schiesl returned from their 
mission to pick up appliances, Schiesl began putting the 
appliances in the chicken coop.  One by one, Schiesl took each 
appliance up the elevator to the second floor.  Randy Neff 
assisted by unloading two appliances from the truck while 
Schiesl took the first appliance into the chicken coop and up 
the elevator.  Schiesl indicated that it took him about 15 
minutes to put all three appliances in the coop.  When Schiesl 
returned from putting the last appliance on the second floor, 
the Neffs were in the vicinity of the door of the coop.  Schiesl 
offered to take them up the elevator to see the coop.  The Neffs 
did not ask to see the coop but they accepted the invitation.  
¶15 The three people boarded the elevator.  Randy Neff 
went up in the elevator to see the chicken coop out of 
curiosity.  Rhonda Neff testified that she went up with her 
No. 99-1069   
 
 
6 
husband and Schiesl to be "nice."  Schiesl had been admonished 
not to take anyone in the elevator to the second floor except 
Johnson or Pierzina.  
¶16 When the elevator was nearing the top of its ascent——
within an inch of the second floor, according to Schiesl——a 
cable on the elevator broke and the elevator crashed to the 
ground.  Schiesl raced to get Johnson from his house and Johnson 
called 911 for emergency help.  Rhonda Neff suffered injuries, 
including a broken ankle, in the fall.  Schiesl also suffered 
very minor injuries in the fall.  
¶17 At the time of the accident, Schiesl had liability 
coverage from his renter's policy with American Family, although 
he did not know it and never checked.  Johnson had liability 
coverage through a policy he purchased from West Central Mutual 
Insurance (West Central).  Pierzina had liability coverage 
through a policy he purchased from Wilson Mutual Insurance 
Company (Wilson Mutual). 
¶18 On January 23, 1997, more than six months after the 
accident, the adjusting service for West Central, Johnson's 
insurer, retained a claims service to investigate the accident. 
 Six days later, an investigator named Clarence Eyers met with 
Pierzina, Johnson, and Schiesl.  Eyers took recorded statements 
in separate areas from each of the three men.  Eyers said at the 
No. 99-1069   
 
 
7 
coverage trial that all three witnesses were "very cooperative." 
 He did not interview the Neffs.2 
¶19 Eyers also took pictures of the scene of the accident, 
including the area of the elevator and the elevator itself.  He 
did not ascend to the second floor of the chicken coop or take 
pictures there because the elevator remained inoperable.  He did 
not take pictures of the T.J. Doc's shop, although he did go 
into the shop.  In his witness interviews, Eyers did not delve 
very deep into the facts surrounding the business relationship 
between Schiesl and Johnson.  Eyers nevertheless testified that 
he believed he conducted a complete investigation.  
 
 
II. LITIGATION HISTORY 
 
¶20 The Neffs commenced suit for Rhonda Neff's personal 
injuries on July 29, 1997——a little more than a year after the 
accident.  The Neffs named Pierzina (owner of the chicken coop) 
and his insurer, Wilson Mutual, and Johnson and his insurer, 
West Central, as defendants in the suit.  Schiesl was not 
initially named as a defendant.  
¶21 In December 1997 Schiesl appeared for a deposition to 
which he was subpoenaed.  He did not have counsel.  The 
attorneys present agreed to delay Schiesl's deposition until he 
had the chance to hire a lawyer.  
                     
2 The parties stipulated, however, that the Neffs would not 
have been available for an interview with Eyers because they 
were represented by counsel.  
No. 99-1069   
 
 
8 
¶22 After conducting some discovery, the Neffs filed an 
amended complaint on February 27, 1998, naming Schiesl as a 
defendant.  In March 1998 West Central provided Schiesl with an 
attorney to defend him on the merits but it reserved its 
coverage defenses. 
¶23 The attorney provided by West Central represented 
Schiesl at a May 4, 1998, deposition.  About this time, the 
Neffs learned that Schiesl had liability coverage at the time of 
the accident through Schiesl's renter's insurance.  The American 
Family policy was for Schiesl's residence and was not associated 
with or purchased by T.J. Doc's or Johnson. 
¶24 On June 3, 1998, the Neffs filed a second amended 
complaint, which added Schiesl's insurer, American Family, as a 
defendant.  
¶25 The accident at issue occurred on July 8, 1996.  
American Family did not receive notice that its insured, 
Schiesl, was involved in the accident until it received the 
Neffs' second amended complaint, on or about June 3, 1998.  It 
did not discuss the matter with Schiesl until June 10, 1998.  
This was 23 months after the accident.  Schiesl later testified 
that (1) he considered himself a victim of the accident and (2) 
once he was named as a defendant in the suit, he believed he was 
insured by T.J. Doc's insurance policy with West Central.  
¶26 American Family raised coverage defenses.  These 
included (1) the assertion that it was prejudiced by Schiesl's 
failure to provide the insurer with timely notice of the 
accident and (2) the business pursuits exclusion in the renter's 
No. 99-1069   
 
 
9 
policy precluded coverage.  The Neffs' assertion that the 
American Family policy provides coverage to Schiesl, and 
American 
Family's 
defense 
that 
Schiesl's 
untimely 
notice 
resulted in prejudice, are the substance of this appeal. 
¶27 On January 25, 1999, Judge Damon conducted a coverage 
trial 
to 
the 
court, 
which 
included 
numerous 
issues 
and 
defendants.3  The circuit court found that Schiesl's act of 
taking the Neffs into the elevator of the chicken coop was an 
insured event under Schiesl's policy with American Family.  The 
court ruled that Schiesl's actions did not come within the 
business pursuits exclusion of Schiesl's policy because Schiesl 
was not conducting business when he showed the chicken coop to 
the Neffs.  However, the circuit court found that Schiesl failed 
to give American Family timely notice of the accident and that 
American Family was prejudiced by Schiesl's failure to do so.  
 
¶28 The Neffs appealed to the court of appeals.  In an 
unpublished opinion, the court of appeals affirmed the decision 
of the circuit court on the issue of untimely notice to American 
Family.  The court of appeals noted that there is inconsistency 
in the case law regarding the standard of review on the issue of 
prejudice from failing to provide timely notice to an insurer.  
However, the court did not resolve the inconsistency because it 
found that an affirmance of the circuit court's ruling was 
                     
3 The circuit court previously conducted a coverage trial 
involving Pierzina's insurer, Wilson Mutual.  The court reformed 
Pierzina's policy with Wilson Mutual to provide coverage to 
Pierzina.  None of the issues relating to Wilson Mutual and its 
duty to provide coverage to Pierzina is before us in this case. 
No. 99-1069   
 
 
10
appropriate regardless of whether it deferred to the circuit 
court's findings or decided the issue de novo.4 
 
III. ANALYSIS 
 
A. 
General Principles 
 
 
¶29 An insured is required to give timely notice to his or 
her insurer.  Kolbeck v. Rural Mut. Ins. Co., 70 Wis. 2d 655, 
659, 235 N.W.2d 466 (1975); Gerrard Realty Corp. v. Am. States 
Ins. Co., 89 Wis. 2d 130, 140, 277 N.W.2d 863 (1979).  This 
principle is reflected in Schiesl's renter's policy which 
required a person claiming coverage to "give prompt notice" of 
an accident or occurrence to the insurer and to "promptly 
                     
4 The issue of whether Schiesl was engaged in a business 
pursuit when he took the Neffs up in the elevator is not before 
this court.  When the Neffs appealed the circuit court's ruling 
concerning Schiesl's failure to provide timely notice to 
American Family, American Family cross-appealed the decision of 
the circuit court regarding the business pursuits exclusion.  
The court of appeals did not address this issue, however, 
because it affirmed the circuit court's ruling that American 
Family was prejudiced by untimely notice.  Because we affirm the 
decision of the circuit court regarding notice, there is no need 
for resolution of any matters regarding the business pursuits 
exclusion. 
The circuit court also ruled that Johnson's policy with 
West Central did not provide coverage for Schiesl with regard to 
the claims of the Neffs because Schiesl was not an employee of 
Johnson. 
No. 99-1069   
 
 
11
forward" any notice, demand, or legal paper relating to the 
accident or occurrence.5 
¶30 Two notice provisions are also included in the 
Wisconsin Statutes.  Wis. Stat. §§ 631.81 and 632.26 (1997-98).6 
 These statutes govern the notice provisions in Wisconsin 
insurance policies and set out the rights and duties of the 
insured and the insurer. 
                     
5 The American Family policy reads in part: 
 
CONDITIONS - SECTION II 
 
. . . .  
 
7. 
What You Must Do in Case of Loss.  In the event 
of an accident or occurrence which this insurance may 
cover, you and any person claiming coverage under this 
policy must: 
 
a. 
give prompt notice to us or our agent, including: 
 
 
(1) the identity of the policy and insured; 
 
 
(2) the time, place and circumstances of the 
accident or occurrence; 
 
 
(3) names and addresses of any claimants and 
witnesses; and 
 
 
(4) as often as we reasonably require, let us 
record your statements and submit to examinations 
under oath by any person named by us, while not in the 
presence of any insured, and sign the transcript of 
the statements and examinations. 
 
b. 
promptly forward to us any notice, demand or 
legal paper relating to the accident or occurrence. 
 
6 All references to the Wisconsin Statutes refer to the 
1997-98 volumes unless otherwise noted.  
No. 99-1069   
 
 
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¶31 Wisconsin Stat. § 631.81 is entitled "Notice and proof 
of loss."  Subsection (1) reads: 
 
TIMELINESS OF NOTICE.  Provided notice or proof 
of loss is furnished as soon as reasonably possible 
and within one year after the time it was required by 
the policy, failure to furnish such notice or proof 
within the time required by the policy does not 
invalidate or reduce a claim unless the insurer is 
prejudiced thereby and it was reasonably possible to 
meet the time limit. 
¶32 Wisconsin 
Stat. 
§ 632.26 
is 
entitled 
"Notice 
provisions."  Subsection (1)(b) provides: 
 
That failure to give any notice required by the 
policy within the time specified does not invalidate a 
claim made by the insured if the insured shows that it 
was not reasonably possible to give the notice within 
the prescribed time and that notice was given as soon 
as reasonably possible.   
Subsection (2) then provides: 
 
EFFECT OF FAILURE TO GIVE NOTICE.  Failure to 
give notice as required by the policy as modified by 
sub. (1)(b) does not bar liability under the policy if 
the insurer was not prejudiced by the failure, but the 
risk of nonpersuasion is upon the person claiming 
there was no prejudice (emphasis added). 
 
¶33 At the coverage trial on January 25, 1999, Judge Damon 
sat as the trier of fact.  He answered certain questions, 
including 
Question 
5, 
which 
read: 
"Was 
American 
Family 
prejudiced by the late notice of the accident?"  He answered the 
question "yes."  Thereafter, Judge Damon made the following 
conclusions: 
 
4. 
The policy of American Family Insurance issued to 
David Schiesl required David Schiesl to provide notice 
of the accident and notice of the lawsuit. 
 
No. 99-1069   
 
 
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5. 
David Schiesl breached his obligation to provide 
notice of the accident and notice of the lawsuit, and 
American Family was prejudiced as a result of said 
breach. 
 
6. 
The American Family Mutual Insurance Company 
policy issued to David Schiesl does not provide 
insurance coverage for the claims of the plaintiffs. 
 
B. 
Standards of Review 
 
 
¶34 We begin our analysis by discussing the standards to 
apply in reviewing the circuit court's determinations on timely 
notice and prejudice to the insurer. 
 
¶35 On the first question——whether notice to the insurer 
was timely——the Neffs more or less concede that the timeliness 
of notice is a question of fact subject to the clearly erroneous 
standard of review.7  In Ehlers v. Colonial Penn Insurance Co., 
the court explained: 
 
[T]his determination is essentially one of fact which 
is to be based not merely on the passage of time but 
upon all the facts and circumstances of the particular 
case.  Therefore, when a party appeals a determination 
of this nature, this court has traditionally applied 
two rules: (1) that the weight to be given testimony 
and the credibility of the witnesses is for the trier 
of facts, in this instance the trial court; and (2) 
the findings of the trier of fact must be sustained 
                     
7 The clearly erroneous standard is the modern equivalent of 
the "great weight and clear preponderance of the evidence" 
standard.  Noll v. Dimicell's, Inc., 115 Wis. 2d 641, 643, 340 
N.W.2d 575 (Ct. App. 1983), cited in Michael S. Heffernan, 
Appellate Practice and Procedure in Wisconsin § 3.5a (2d ed. 
1995).  The change in terminology occurred when this court 
promulgated a new civil procedure code in 1975.  Heffernan, 
supra, at § 3.5a. 
No. 99-1069   
 
 
14
unless they are against the great weight and clear 
preponderance of the evidence. 
81 Wis. 2d 64, 67-68, 259 N.W.2d 718 (1977) (citations omitted). 
 
¶36 The insurer has the burden to show that notice was not 
timely.  Resseguie v. Am. Mut. Liab. Ins. Co., 51 Wis. 2d 92, 
104, 186 N.W.2d 236 (1971).  To make its case, the insurer must 
come forward with evidence that the insured has not complied 
with the notice requirements of the policy.  This evidence may 
not be dispositive, however, if the insured is able to satisfy 
either of two conditions. 
¶37 First, the insured does not have a duty to report 
"unless he [or she] has reasonable grounds to believe that he 
[or she] is a participant in an accident."  Kolbeck, 70 Wis. 2d 
at 659.  As a result, an insured's duty to notify may not arise 
at the same time as the accident or occurrence.  Under certain 
circumstances, the duty to give notice may arise later.  Thus, 
an insured has a duty to report to the insurer "as soon as 
reasonably possible" after the accident or occurrence, or "as 
soon as reasonably possible" after the time the insured has 
reasonable grounds to believe that he or she is a participant in 
an accident or occurrence, whichever is later.  Id. 
¶38 Second, under Wis. Stat. § 632.26(1)(b), the insured 
may show that (1) it was not reasonably possible to give the 
notice within the prescribed time and (2) notice was given as 
soon as reasonably possible. 
No. 99-1069   
 
 
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¶39 These are all factual determinations and the circuit 
court's decision will be upheld unless the determinations are 
clearly erroneous. 
¶40 There may be some circumstances in which no judge or 
jury 
could 
reasonably 
find 
that 
notice 
was 
timely, 
or 
conversely, untimely.  RTE Corp. v. Md. Cas. Co., 74 Wis. 2d 
614, 629, 247 N.W.2d 171 (1976).  However, we view the question 
of timely notice as essentially a fact question, and an 
appellate court should not substitute its judgment for that of 
the fact finder unless the finding is "contrary to the great 
weight and clear preponderance of the evidence."  State v. 
Thomas, 2000 WI 13, ¶13 n.7, 232 Wis. 2d 714, 605 N.W.2d 836. 
 
¶41 On the second 
question——whether the 
insurer was 
prejudiced by late notice——the parties disagree about the 
standard to be applied.   
¶42 When a determination has been made that the insured's 
notice to the insurer was untimely, the court must decide 
whether the insurer was prejudiced by the insured's breach of 
duty.  Under Wis. Stat. § 632.26(2), late notice is not 
prejudicial per se, "but the risk of nonpersuasion is upon the 
person claiming there was no prejudice." 
¶43 The decisions interpreting Wis. Stat. § 631.81(1) hold 
that when the insured fails to give notice within one year after 
the time required by the policy, "there is a rebuttable 
presumption of prejudice and the burden of proof shifts to the 
claimant to prove that the insurer was not prejudiced by the 
untimely notice."  Gerrard Realty, 89 Wis. 2d at 146-47. 
No. 99-1069   
 
 
16
¶44 Prejudice to the insurer in this context is a serious 
impairment of the insurer's ability to investigate, evaluate, or 
settle a claim, determine coverage, or present an effective 
defense, resulting from the unexcused failure of the insured to 
provide timely notice.  Whether an insurer has been prejudiced 
is governed by the facts and circumstances in each case.  As the 
court said in Rentmeester v. Wisconsin Lawyers Mutual Insurance 
Co., 164 Wis. 2d 1, 8-9, 473 N.W.2d 160 (Ct. App. 1991) (citing 
Wis. Stat. § 805.17(2)), "[W]e will uphold the trial court's 
factual determinations underlying the question of prejudice 
unless clearly erroneous." 
¶45 The process for determining prejudice was discussed by 
the court of appeals in Ranes v. American Family Mutual 
Insurance Co., 212 Wis. 2d 626, 569 N.W.2d 359 (Ct. App. 1997), 
aff'd, 219 Wis. 2d 49, 580 N.W.2d 197 (1998).  The court 
explained that, in the absence of timely notice, the insured has 
the burden of proving the insurer's lack of prejudice.  The 
court acknowledged that the burden of proof is sometimes 
"assigned to the party who is in the best position to obtain or 
possess the evidence germane to the question to be litigated."  
Ranes, 212 Wis. 2d at 635.  However, "[t]he effects of failing 
to give notice on [the insurer] are as available to the insured 
as they are to the insurer."  Id.  
 
Discovery 
can 
identify 
the 
specific 
claims 
of 
prejudice that may be asserted and the basis upon 
which the insurer asserts them.  As a matter of 
general policy, we see no specific advantage possessed 
by the insurance carrier in regard to the question of 
prejudice to abrogate the traditional rule that the 
No. 99-1069   
 
 
17
burden of proof is on the person asserting the 
exception.   
 
 . . . Once lack of notice has been demonstrated, 
the 
insured must 
produce 
sufficient evidence to 
satisfy the factfinder by a preponderance of the 
evidence that no prejudice has been suffered by the 
insurer as a result of the failure to give such 
notice. 
Id. at 635-36 (emphasis added). 
 
¶46 This court affirmed the court of appeals decision in 
Ranes v. American Family Mutual Insurance Co., 219 Wis. 2d 49, 
580 N.W.2d 197 (1998).  We concluded that "[r]ecognizing a 
presumption of prejudice and placing the burden to rebut the 
presumption on an insured take into account the rights and 
responsibilities of both the [insurer] and the insured."  219 
Wis. 2d at 61-62. 
 
¶47 This 
discussion 
confirms 
that 
the 
determination 
whether an insurer has been prejudiced by the lack of timely 
notice is essentially a question of fact.  The fact finder's 
determination should not be set aside unless it is clearly 
erroneous.  Wis. Stat. § 805.17(2).  Wisconsin Stat. § 632.26(2) 
states that "the risk of nonpersuasion is upon the person 
claiming there was no prejudice."  This statement signals a 
factual determination. 
¶48 Our conclusion on this question is consistent with 
Couch on Insurance.  "Generally, whether a liability insurer has 
been prejudiced by late notice is considered a question of fact, 
but may be determined as [a] matter of law where facts are not 
No. 99-1069   
 
 
18
in dispute."  Lee R. Russ & Thomas F. Segalla, 13 Couch on 
Insurance 3d § 193:31 (1999) (footnotes omitted). 
 
C. 
Timeliness of Notice 
 
 
¶49 Our task now is to apply the standard of review to the 
facts of the case.  The accident occurred on July 8, 1996.  
American Family learned about the accident on or about June 3, 
1998, when it received the second amended complaint naming it as 
a defendant.  The time lapse was 23 months. 
 
¶50 David Schiesl's renter's policy contained language 
requiring "prompt notice" in the event of an accident that might 
lead to coverage.  The policy required the insured to provide 
information about the time, place, and circumstances of the 
accident, as well as the names and addresses of claimants and 
witnesses.  It required the insured's cooperation in recording 
statements, including examinations under oath, and assistance in 
negotiating settlements.  It required the insured to "promptly 
forward" any notice, demand, or legal paper relating to the 
accident. 
¶51 After 
hearing 
testimony 
from 
Schiesl, 
Johnson, 
Pierzina, Rhonda Neff, Randy Neff, and the investigator, Eyers, 
the circuit court concluded that Schiesl failed to provide 
American Family with timely notice. 
¶52 The circuit court found that Schiesl should have known 
"that he might have some trouble" as a result of the accident.  
The circuit court was not swayed by the argument that the one-
No. 99-1069   
 
 
19
year period to provide notice without a presumption of prejudice 
should have begun on the day Schiesl received a complaint naming 
him as a defendant.  Schiesl knew that he was not supposed to 
take anyone up in the elevator to the second floor of the 
chicken coop.  Schiesl alone operated the elevator with the 
Neffs aboard.  It was not clearly erroneous for the circuit 
court to find that Schiesl should have known "that he might have 
some trouble" as a result of the accident. 
¶53 Even if the circuit court had accepted his argument 
that he had no duty to inform American Family until he was named 
in the lawsuit in February 1998, Schiesl himself did not provide 
notice to American Family, and American Family did not receive 
notice until the Neffs sued the insurer in June 1998.  This 
exacerbated an already delayed situation. 
¶54 The circuit court's finding of untimeliness was not 
clearly erroneous.  An appellate court could not set aside this 
finding of fact on grounds that it was against the great weight 
or clear preponderance of the evidence.  Compton v. Shopko 
Stores, Inc., 93 Wis. 2d 613, 616, 287 N.W.2d 720 (1980). 
¶55 We conclude that the circuit court did not err in 
finding that David Schiesl did not provide timely notice to 
American Family. 
 
D. 
Prejudice 
 
No. 99-1069   
 
 
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¶56 We turn now to the issue of prejudice.  Was American 
Family prejudiced by the failure of the insured to provide 
timely notice?  The circuit court found that it was. 
 
¶57 The Neffs contend that "as a matter of law American 
Family was not prejudiced by the late notice."  They claim that 
American Family received "the full benefit of a complete and 
timely investigation of the accident and its ability to defend 
or settle the case has not been impaired." 
¶58 Schiesl's failure to provide timely notice within one 
year of the accident created a presumption that American Family 
was prejudiced by the lack of notice.  Gerrard Realty, 89 Wis. 
2d at 146-47 (interpreting Wis. Stat. § 631.81).  Even if there 
were no presumption, "the risk of nonpersuasion is upon the 
person claiming there was no prejudice," which in this case is 
Schiesl.  Wis. Stat. § 632.26(2).  As we discussed above, we 
will uphold the circuit court's finding that American Family was 
prejudiced 
by 
the 
untimely 
notice 
unless 
it 
is 
clearly 
erroneous. 
¶59 Insurers 
want 
timely 
notice 
so 
that 
they 
can 
investigate the circumstances of an accident, contact the 
witnesses while they are still available and before their 
recollection of events is forgotten or distorted, and locate 
unknown witnesses.  Ehlers, 81 Wis. 2d at 67 (citing Resseguie, 
51 Wis. 2d at 100).  The ability to conduct an investigation can 
be impaired when witnesses are no longer available or when 
witnesses become entrenched in a position because they have 
calculated the legal effect of their answers.  Sometimes, as 
No. 99-1069   
 
 
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here, relationships among parties and witnesses change, memories 
fade, and records are lost. 
¶60 Often the insurer has a duty not only to indemnify but 
also to defend the insured.  The insurer ought to have some 
latitude in securing the investigator and attorney of its 
choice, provided that its choice does not compromise the 
interest of the insured.8   
¶61 An insurer has the right to limit its liability by the 
terms of the contract.  Resseguie, 51 Wis. 2d at 101.  Two ways 
to limit liability are to permit the insurer to determine its 
coverage responsibility promptly, and to enable its adjusters to 
pay without suit.  Hiles v. Hanover Fire Ins. Co., 65 Wis. 585, 
591, 27 N.W. 348 (1886).  The failure to provide timely notice 
may impede the determination of coverage and impair the ability 
to settle the case. 
 
¶62 The Neffs rely heavily on the investigation by Eyers 
for the proposition that American Family was not prejudiced by 
the delay in notice.  They argue that American Family received 
the full benefit of a complete and timely investigation and was 
able to defend or settle the case without real difficulty.  
                     
8 The principle involved is well stated in a different 
context in Penson v. Ohio, 488 U.S. 75, 86-87 (1988), where the 
Supreme 
Court 
declared: 
"One 
party's 
right 
to 
representation . . . is not satisfied by simply relying on 
representation provided to another party. . . . A [party] is 
entitled 
to 
single-minded 
advocacy 
for 
which 
the 
mere 
possibility of a coincidence of interest with a represented 
codefendant is an inadequate proxy." 
No. 99-1069   
 
 
22
 
¶63 American Family disagrees.  It contends that Eyers' 
"investigation did not delve deeply enough into facts relevant 
to Schiesl's liability, and did not address, in any way, the 
factors 
necessary 
to 
determine 
whether 
American 
Family's 
exclusions were applicable."  It also argues that Eyers "did not 
do many things [American Family] likely would have done had it 
been given the opportunity to investigate the accident."  
American Family asserts that Eyers engaged the main participants 
only in brief interviews, did not ask Pierzina or Johnson about 
rules regarding use of the coop or elevator, did not go up to 
the second floor of the coop or photograph that area, did not 
photograph the T.J. Doc's shop, and was unable to determine how 
the accident occurred——that is, why the cable broke.  
¶64 Finally, 
American 
Family 
points out 
that 
Eyers' 
purpose in conducting the investigation for West Central did not 
coincide with its needs in investigating the accident.  Once 
Eyers determined that Schiesl was not an employee of T.J. Doc's 
or Johnson, Eyers had no reason to probe further into the 
details of the accident because West Central did not have to 
provide coverage to Schiesl if there were no employer-employee 
relationship.  
¶65 Eyers conducted his interviews on January 29, 1997, 
more than 200 days after the accident.  The Neffs filed suit 
exactly six months later.  Had Schiesl notified American Family 
promptly, he could have received assistance before he was 
interviewed by Eyers.  American Family could have had six months 
after the interview to settle with the Neffs before any suit was 
No. 99-1069   
 
 
23
filed.  The insurer could have had another seven months after 
suit was filed before Schiesl was named as a defendant and 
approximately 22 months to assist him before his deposition was 
taken. 
 
¶66 The 
Neffs 
make 
good 
arguments 
that 
Eyers' 
investigation 
was 
sufficient 
to protect American Family's 
interests.  They contend that the investigation by Eyers was 
done at a time when the witnesses' memories were fresh.  They 
assert that American Family received a complete and timely 
investigation file with information that was complete and 
accurate.  Finally, they argue that American Family had the 
opportunity to view the unfixed elevator once it became a party 
to the lawsuit but chose not to do so.  
¶67 Nonetheless, we cannot conclude that the circuit court 
was clearly erroneous in finding that American Family was 
prejudiced by the delay.  Because prejudice to the insurer is 
often difficult to prove, the insurer is aided by a presumption 
of prejudice when notice is not given within one year.  Ranes, 
219 Wis. 2d at 62.  The circuit court was not persuaded that 
Schiesl had overcome this presumption of prejudice.  It found 
prejudice, and its finding may not be overturned on this record. 
 
IV. CONCLUSION 
 
¶68 In summary, we conclude that the clearly erroneous 
standard is the proper standard of review of the circuit court's 
findings relating to both timely notice and prejudice.  In this 
No. 99-1069   
 
 
24
case, the circuit court's findings regarding timely notice and 
prejudice are not clearly erroneous.  They are supported by the 
pertinent facts.  The presumption that American Family was 
prejudiced by not receiving timely notice 23 months after the 
accident has not been overcome.  Accordingly, we affirm the 
decision of the court of appeals.  
 
By the Court.—The decision of the court of appeals is 
affirmed. 
 
 
 
 
No. 99-1069   
 
 
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